Zynga, Inc.’s ZNGA fate is expected to turn around as founder Mark Pincus rejoins the company as the new CEO replacing Don Mattric who served for two years.
Following the news, the stock gained almost 3.6% (10 cents) eventually closing at $2.90 on Wednesday. Of late, Zynga has been trending down losing more than 30% market value over the past one year. To-date, Zynga has lost over 60% from its peak, resulting in significant concern among investors regarding its prospects in the highly competitive video game industry.
With Zynga, Pincus not only entered the video game market but also secured a position in the world’s billionaire’s list in 2011 backed by the popularity and growing demand for online games. Pincus’ net worth was $2 billion when Zynga’s shares were at an all-time high of $14.69 as on Mar 2, 2012. However, since then, the company has been going downhill.
We believe that factors like insider trading, several lawsuits by investors, mass employee lay-offs and lack of adaptability to consumer preference for mobile games instead of PCs primarily led to Zynga’s downfall. The company has also been facing stiff completion from leading mobile game developers such as Electronic Arts Inc. EA, Activision Blizzard, Inc. ATVI and Glu Mobile, Inc. GLUU.
However, Pincus’ return as CEO, who also serves as Zynga’s board chairman, at this crucial time will be closely watched by investors. Currently, Pincus holds around 10% stake in Zynga and 60% voting rights. He also served as the chief product officer of the Zacks Rank #3 (Hold) company until Mattric took office.
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