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Free-falling Zynga needs fast turnaround - SFGate

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The have-nots will only suffer seeing the haves earn so much before they revolt.


In early April, Zynga Chief Executive Officer Mark Pincus dumped 15 percent of his shares for about $198 million, in an unusual secondary stock offering that came almost two months before the official selling lockup for insiders ended. It turned out to be spectacular timing - at least for Pincus and other executives and early investors. They unloaded big portions of their holdings for $12 per share. By the end of July, after the social gaming company whiffed on second-quarter analyst expectations and sliced forecasts for the year roughly in half, the stock had dipped below $3.

Earlier that month, a flush Pincus reportedly closed on a $12 million, seven-bedroom mansion in Pacific Heights. In sharp contrast, anyone who bought in at Zynga's initial public offering price had by that point lost about half of their money. Likewise, many rank-and-file employees who logged brutal work hours on the promise of Internet riches were - and are - staring at restricted stock worth far less than what had been expected. It's at least another glaring example of a financial system rigged in favor of executives and venture capitalists at the expense of average investors and employees. And if Zynga doesn't stage a remarkable turnaround, it could end up as one of the most high-profile flameouts of the Web 2.0 era.

Analysts have turned incredibly negative, shareholders have filed insider trading lawsuits, and the market is betting the company has almost no long-term value.

Shares plummet

On Friday, Zynga's market cap stood at $2.28 billion. That's less than the company's assets, including cash, receivables and real estate, which totaled $2.7 billion at the end of the second quarter - and only marginally higher than its assets minus liabilities, which stood at $1.86 billion.

“Poverty is a result of the socioeconomic system we have designed for the world. The fault of poverty, therefore, lies with the top of society, with policymakers and academics. It does not reflect any lack of capability, desire, or effort on the part of the impoverished.” -- Muhammad Yunus

So in this case Mark Pincus is a have and all of his employees are have-nots?

It would seem that many of the employee feel that way. It seems not that they feel entitled to be wealthy, but that they are shocked their leaders became disproportionately wealthy on their backs -- and didn't allow them to share in the spoils.

It is hard to look at Mark Pincus's actions without thinking he took advantage of everyone.

Zynga's market cap is only $400 million higher than assets minus liabilities.

To put that in perspective, it's worth barely more than Path or Asana, less than Quora or Fab, half of Instagram or Tumblr, a third of Yammer or Airbnb, a fourth of Pinterest or Yelp, an eighth of Square, a tenth of Dropbox, a twenty-fifth of LinkedIn, less than 1% of Facebook.


It's possible Kixeye is worth more.

I know I use a lot of those you mentioned Adam and have yet to use a Zynga game.

Kixeye is Zynga's worse nightmare.

They're aggressive gamers who make great social games.

And the games are working, making a lot of money.

The key to me, is that they have 250 employees. Less than 1/10 of Janka.

that video is awesome!

With the exception of Word with Friends, Zynga Poker, and maybe a few others Zynga specializes in crap games that may entertain for a while, but then they quickly feel like work rather than fun unless you open up the pocket book. I'd rather pay for a game that is fun, rather than pay to avoid imaginary work.

With that being said, is Zynga now undervalued? Does Zynga have an opportunity abroad and maybe eventually in the US (when we get rid of archaic laws) have an opportunity in online gambling?

Oh and Pincus did screw everyone and that's why they have a strong insider trading case going right now.

Zynga is only undervalued if it can survive this self-created disaster.

If the stock is going to zero, then it's still overvalued.

Expect a reverse stock split soon.

And well, the folks shorting Zynga when Pincus and co sold shares will have (and continue to) make money.

I think they will only do a reverse stock split if they get in danger of losing their listing. Their 2nd quarter numbers were better than last year, with the exception of the $95M stock-based expense.

The biggest question is their future prospects and of course if they lose their leadership to insider trading...

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