Zynga Perhaps the worst is yet to come.
Last week was lousy enough for Zynga. The reduction in revenues and lower forecasts for the upcoming fiscal year resulted in a 40% drop in the company's shares. This event intensified fatalist predictors.
Making an obituary for Zynga is somewhat premature, but the company is almost guaranteed to wait for the situation to deteriorate before the light appears at the end of the tunnel.
In an attempt to rectify the current state of affairs, Zynga is faced with a huge number of obstacles. The growth of social game slows down, and the number of players in the company's flagship games falls. Investors are aware of these events, and have every right to worry. But the biggest looming problem is the expiration of options for employees.
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August 16 will expire the ban on the sale of 150 million shares. This means that employees will be able to sell their shares. Today, the company's stock is not subject to lust. And real money is better than their absence. And it's safe to say that some employees will cash out their options.
Zynga used the option as one of the main chips when recruiting for work on pre-IPO days. The developers moved from the gaming industry to consoles, not so much because they believed in the company's future (although it cannot be discounted), but because of the promise of rapid enrichment as a result of an IPO.
At that time, the explosive growth of Zynga shares was not in any doubt. But in this world there is nothing permanent. And those developers who are thinking about another job change will transfer some amount of shares into cash before they leave.
The situation is complicated by the number of Zynga shares available for bidding. When Zynga became a public company, a total of 100 million shares were available. Between the secondary placement of shares and the expiration of 3 periods of bans on the sale, the number of shares reached 600 million. The latest ban on sales will expire in August, and the number of shares will grow to 800 million.
A large number of stocks usually make companies less volatile, but for Zynga, supply begins to exceed demand, which will provide even more subsidence for the stock price.
And you can be sure that Zynga shares are currently falling. Alarmists claim that Zynga shares are sold for half the price of THQ. This is not a very fair comparison, since THQ recently conducted a reverse split of 10 to 1 stocks. But Zynga has increasingly entered Majesco, whose share price has not exceeded $ 4 over the past 5 years.
In addition to the appearance of options on the stock market, ordinary litigation will lead to poor results. A Californian firm filed a class action lawsuit blaming Zynga for concealing information about reducing user base and revenue. Such cases rarely reach a logical conclusion, but they create an unfavorable background and contribute to a fall in the price of shares.
And it was not entirely clear the decision taken on Tuesday by Operations Director John Scarpert (veteran EA and Microsoft) to increase control over the games. This may be the most brilliant solution in recent years, which may adversely affect the stock price. Investors will need a scapegoat, but Scarpert is one of the most savvy managers in the gaming industry. Mark Princus, who is now responsible for the development of games, has practically no experience, and with the deterioration of the situation, the credibility of his leadership qualities will decrease.
Zynga's problems are not solely her fault. The company was pulled down by Facebook's IPO (after which the social network landed with a thud and which postponed other public offerings for an indefinite period). And while Zynga is looking for an opportunity to become less dependent on its largest partner, the stock price will suffer. This process includes the promotion of Zynga.com, actively hiring partners to develop the site, but it will take some time to get the fruits.
The mobile application market is another possible source of revenue, but Zynga has not quite learned how to extract profit from it. And after the overpriced purchase of OMGPOP (and the subsequent unsatisfactory results of Draw Something), investors will be very skeptical about purchases in this area.
Zynga is going through a transitional period, and no one expects her to quickly get out of it. (Investors, of course, did not suspect that such a situation would happen soon after the IPO). If we assume that the company will be able to cope with the brain drain and adjust the course, especially in the context of mobile applications, it will be able to return to the powerful positions it had been in quite recently. But until then, investors (including developers targeting options) will face a thorny path.
Shl. After translating the article, a video of German Klimenko (owner of liveinternet.ru) came across. Quite reasonably (pessimistically) describes the possible future of social networks and game projects.
Making an obituary for Zynga is somewhat premature, but the company is almost guaranteed to wait for the situation to deteriorate before the light appears at the end of the tunnel.
In an attempt to rectify the current state of affairs, Zynga is faced with a huge number of obstacles. The growth of social game slows down, and the number of players in the company's flagship games falls. Investors are aware of these events, and have every right to worry. But the biggest looming problem is the expiration of options for employees.
')
August 16 will expire the ban on the sale of 150 million shares. This means that employees will be able to sell their shares. Today, the company's stock is not subject to lust. And real money is better than their absence. And it's safe to say that some employees will cash out their options.
Zynga used the option as one of the main chips when recruiting for work on pre-IPO days. The developers moved from the gaming industry to consoles, not so much because they believed in the company's future (although it cannot be discounted), but because of the promise of rapid enrichment as a result of an IPO.
At that time, the explosive growth of Zynga shares was not in any doubt. But in this world there is nothing permanent. And those developers who are thinking about another job change will transfer some amount of shares into cash before they leave.
The situation is complicated by the number of Zynga shares available for bidding. When Zynga became a public company, a total of 100 million shares were available. Between the secondary placement of shares and the expiration of 3 periods of bans on the sale, the number of shares reached 600 million. The latest ban on sales will expire in August, and the number of shares will grow to 800 million.
A large number of stocks usually make companies less volatile, but for Zynga, supply begins to exceed demand, which will provide even more subsidence for the stock price.
And you can be sure that Zynga shares are currently falling. Alarmists claim that Zynga shares are sold for half the price of THQ. This is not a very fair comparison, since THQ recently conducted a reverse split of 10 to 1 stocks. But Zynga has increasingly entered Majesco, whose share price has not exceeded $ 4 over the past 5 years.
In addition to the appearance of options on the stock market, ordinary litigation will lead to poor results. A Californian firm filed a class action lawsuit blaming Zynga for concealing information about reducing user base and revenue. Such cases rarely reach a logical conclusion, but they create an unfavorable background and contribute to a fall in the price of shares.
And it was not entirely clear the decision taken on Tuesday by Operations Director John Scarpert (veteran EA and Microsoft) to increase control over the games. This may be the most brilliant solution in recent years, which may adversely affect the stock price. Investors will need a scapegoat, but Scarpert is one of the most savvy managers in the gaming industry. Mark Princus, who is now responsible for the development of games, has practically no experience, and with the deterioration of the situation, the credibility of his leadership qualities will decrease.
Zynga's problems are not solely her fault. The company was pulled down by Facebook's IPO (after which the social network landed with a thud and which postponed other public offerings for an indefinite period). And while Zynga is looking for an opportunity to become less dependent on its largest partner, the stock price will suffer. This process includes the promotion of Zynga.com, actively hiring partners to develop the site, but it will take some time to get the fruits.
The mobile application market is another possible source of revenue, but Zynga has not quite learned how to extract profit from it. And after the overpriced purchase of OMGPOP (and the subsequent unsatisfactory results of Draw Something), investors will be very skeptical about purchases in this area.
Zynga is going through a transitional period, and no one expects her to quickly get out of it. (Investors, of course, did not suspect that such a situation would happen soon after the IPO). If we assume that the company will be able to cope with the brain drain and adjust the course, especially in the context of mobile applications, it will be able to return to the powerful positions it had been in quite recently. But until then, investors (including developers targeting options) will face a thorny path.
Shl. After translating the article, a video of German Klimenko (owner of liveinternet.ru) came across. Quite reasonably (pessimistically) describes the possible future of social networks and game projects.
Source: https://habr.com/ru/post/149337/
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