Zynga stock down the drain

Soul_of_Solace · Jul 2012

http://blogs.wsj.com/marketbeat/2012/07/25/zynga-posts-surprise-loss-shares-down-more-than-30/?mod=yahoo_hs
http://finance.yahoo.com/q?d=t&s=ZNGA

Zynga earnings just hit the Tape, they were bad, the outlook was worse, and the stocks getting clobbered.

Shares were down 8% in late trading before the report even hit the Tape; theyre now down 41% at $2.99.

Facebook shares are down 6.6% as well, as investors worry about the read-through (company reports earnings tomorrow).

Zynga slashed its 2012 outlook. The company now projects adjusted EPS for the year of 4 cents to 9 cents, which is well, well below current Street consensus of 26 cents, according to FactSet.

The earnings were a salve by comparison. For the second-quarter, the company reported a loss of 3 cents a share, or a profit of 1 cents a share on an adjusted basis, on revenue of $332.5 million.

Thats off Street consensus, which was for earnings of 5 cents a share on revenue of $344 million.

Getting pummeled in after-hours trading down nearly 38%

What happened? I thought Zynga was the big thing and social/casual games were the next bet?

ericdigital · Jul 2012

It's definitly harsher for Zynga but tech companies are taking a beating across the board for the most part right now. Truth be told the gold rush is passed for social/facebook games. Zynga is going to have to double down and find safe long term platforms and solutions for the future unless there is major innovation in the space. There is just less people playing games on Facebook right now.

Soul_of_Solace · Jul 2012

^^^You are right, it looks like they're going to enter the real-money gambling market:
http://www.gamasutra.com/view/news/174743/Here_we_go_Zynga_to_enter_realmoney_gambling_market.php

Newsbrief: Social game giant Zynga announced today that it's decided to expand beyond free to play, microtransaction-based titles like FarmVille and Words With Friends, and has begun to develop games that support real-money gambling.

Zynga CEO Mark Pincus said that the company plans to launch its first real-money poker game in the first half of 2013. He did not confirm which regions the game will support, but it might be some time until these types of games hit the U.S., as federal laws put strict limitations on online gambling.

"We have our first [real-money gambling] products in development, and we intend to release them in markets that are regulated and open, subject to our getting licensing," Pincus said. "The U.S. is obviously an attractive market, but it's not an open and regulated market today, so we currently don't have plans for the U.S."

It's actually fitting.

GarageBay9 · Jul 2012

Soul_of_Solace wrote: »

^^^You are right, it looks like they're going to enter the real-money gambling market:
http://www.gamasutra.com/view/news/174743/Here_we_go_Zynga_to_enter_realmoney_gambling_market.php

It's actually fitting.

"You only have 12 Aces of Spades. 20 are needed to complete this hand. Buy 5 now for only $4.99"

Tairii · Jul 2012

GarageBay9 wrote: »

"You only have 12 Aces of Spades. 20 are needed to complete this hand. Buy 5 now for only $4.99"

lolliwagon

Don't mean to sound mean, but thank god. I was annoyed at hearing all of this, CASUAL GAMING WILL REPLACE CONSOLES/PC GAMES. I didn't want to be stuck making art for 2D facebook games. ;<

Ben Apuna · Jul 2012

Here are some of the reasons why Zynga is failing:

http://www.gamesbrief.com/2012/05/zyngas-share-price-collapses-as-status-as-facebook-proxy-disappears/

http://www.whatgamesare.com/2012/06/nobody-needs-farmville-2-zynga.html

http://www.gamesbrief.com/2012/02/will-the-nature-of-the-appstore-kill-zyngas-cloning-strategy/

http://www.whatgamesare.com/2012/05/your-game-is-a-graph.html

Soul_of_Solace · Jul 2012

Little bump. Zynga CEO cashed out before this crash and is the subject of investigation by law-firms for security violations:
http://www.gamasutra.com/view/news/174823/Zynga_CEO_cashed_out_for_200M_before_stock_implosion.php
http://www.businesswire.com/news/home/20120726006846/en/Schubert-Jonckheer-Kolbe-LLP-Announces-Investigation-Zynga

Though Zynga's stock prices have plummeted since the company's earnings report on Wednesday, CEO Mark Pincus and other insiders managed to reduce their damages from the crash by dumping shares months ago.

Pincus along with other Zynga executives and investors sold a portion of their shares in April, bringing in around $516 million at $12 a share, a couple of dollars above the stock's initial IPO price, according to a report from Daily Ticker.

The company's stock has floated around the $5 mark for a few weeks now, but after Zynga reported disappointing revenues and a third-straight quarter of losses for the April-to-June period yesterday, share prices plunged to a new low of $3.

Of those insiders who sold their stocks early, Pincus made the most and brought in $200 million from the sale, but several others also took home eight-figures. They would have made a lot less if they waited until today to dump their shares like many other investors.

The fortunate timing of their cashouts -- conducted in the same quarter when Zynga's's business appeared to deteriorate to the point that its share prices collapsed once investors were updated on its status -- has raised a few eyebrows.

One law firm, Newman Ferrara LLP, is already conducting an investigation into whether Zynga misrepresented or failed to provide investors information about problems with its social games, such as delayed launches or the company's dependence on Facebook's platform.

[Update: Two other firms specializing in securities litigation, Johnson & Weaver LLP and Schubert Jonckheer & Kolbe LLP, are also now investigating whether these insiders had access to data indicating Zynga's unfavorable business and financial conditions when they sold their shares.]

Earlier today, analysts expressed doubt that Zynga will be able to continue to dominate the social game space as it has for two years now, commenting "The bottom line is that Zynga over promised and significantly under delivered."

It will be interesting to see if they find out if something really did happen and what the fallout to such a revelation would be.

Mrskullface · Jul 2012

it's been failing for ever. went from 8 bucks and sat at 15 for second then stayed around and under 5 for a long time. Goes to show, never invest in tech stocks.

dempolys · Jul 2012

Mrskullface wrote: »

it's been failing for ever. went from 8 bucks and sat at 15 for second then stayed around and under 5 for a long time. Goes to show, never invest in tech stocks.

oh, I wouldn't say "never"...

ericdigital · Jul 2012

Mrskullface wrote: »

it's been failing for ever. went from 8 bucks and sat at 15 for second then stayed around and under 5 for a long time. Goes to show, never invest in tech stocks.

To be fair the first major dip was traders using Zynga as a Facebook proxy dumping and switching to FB during the IPO. They've been relatively stable at the post FB IPO price until this first major trouble. I probably wouldn't doom a stock that has been on the market for less than a year.

Mrskullface · Jul 2012

Yes true it's not 100% true that all tech stocks are bad. But with a win ratio of 1 out of 100000000 tech stocks doing well it seems bad for personal investments. Not that I know so much about it, it's just watching a ton of tech stock besides apple just plummet or wont move.

as for Zynga to FB stocks, seems like people didn't switch and just pulled out. that's why it just flopped out of the gate.

It seems extra risky for those two companies, FB being an untested marketing machine and Zynga going mobile that this mess was bound to happen.

now i'm wondering since it's so low if you could maybe turn a hundred bucks into a bunch more monies If it goes back to 15 bucks, or even 8.

Stocks be scary!

Zynga stock down the drain

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