Any Love is Welcome: Mark Pincus – Mr. Unpopular – Is Advised to take Zynga Private

Zynga (ZNGA) CEO Mark Pincus must be pretty sick of hearing shareholders whine about their huge losses in his game company by now, considering the stock price has dropped steadily for the past six months. Now he’s hinting that he could just take his ball and go home, less than a year post-IPO, by taking the company private. To some shareholders, this is a fine idea, as a gander at a stock chart would suggest.

ZNGA Chart

ZNGA data by YCharts

Pincus raised the possibility of a private take-out last night when he re-Tweeted this weblog by Venture Capitalist Charles Hudson.

Hudson kindly reminds us that Zynga’s bookings have gone from zero to more than $1 billion in just five years. He contends that once Zynga overcomes some difficult, essentially technical issues, Zynga’s fortunes will improve greatly. This may take awhile, and he points out that the private equity guys tend to be more patient than the quarter-focused public company analysts. Besides, he notes, the company is a lot cheaper now.

Of course, there’s no guarantee Zynga shareholders would be any happier with a buyout offer than they are waiting for a rebound in the share price. Consider what happened when fashion industry genius Kenneth Cole grew weary of investor demands. The board at Kenneth Cole Productions (KCP) approved Mr. Cole’s buyout of the company in June, at $15.25 a share. It’s not good news for everyone.

KCP Chart

KCP data by YCharts

It’s quite possible that Pincus’ tweet had more to with confidence building than actual interest in privatization. Pincus recently took a beating when he warned investors that Zynga’s Q3 earnings would be particularly nasty. Hudson’s report is a reminder that the private equity guys would probably cut him some slack on the short term numbers in order to get long-term gains. Hint, hint.

Dee Gill is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.



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