Analysis: Angst at Zynga over tumbling share price

Fri Jun 1, 2012 5:07pm EDT
 
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By Gerry Shih

SAN FRANCISCO (Reuters) - In April, a small circle of top Zynga executives and early investors scored a $500 million-plus payday via a choreographed private share sale.

That deal was well-timed. Since then, the online gaming company's stock has shed almost half of its value as investors questioned Zynga's long-term prospects and Facebook Inc's sputtering IPO sapped confidence in the consumer Internet.

The share sale may have helped nudge Zynga's stock price into a steady decline that has stoked discontent at the company, which, like much of Silicon Valley, relies on generous stock awards to attract talent.

The Farmville publisher is now barely holding at $6, down 40 percent from a December IPO price of $10, as employees at the end of April were freed from their "lock-up" agreements to sell their stock holdings. Employees past and present told Reuters that morale is ebbing along with the stock price.

"Zynga's a tough place to work," said Lou Kerner, founder of the Social Internet Fund, who has invested in Zynga. "You go there because there's a lot of upside to the shares, so it's disappointing when the markets are against you."

Chief Executive Mark Pincus parried questions at the All Things Digital conference on Wednesday, where he defended his stock price, Zynga's ability today to attract top-notch engineers, and the acquisition of OMGPOP, developer of mobile hit Draw Something.

"I can't think of any real difference in recruiting that's happened because of being public or because of our stock being up or down," Pincus said. "My job is focusing on building products ..., not really trying to figure out whether the markets are valued right."

Hundreds of former employees and other investors were allowed this week to offload up to 352 million shares -- the majority of outstanding stock -- for the first time since the company debuted on the Nasdaq in December. The company's shares traded at $6.00, down 4.2 percent, on Friday afternoon.   Continued...