The single largest shareholder of Zynga will sell approximately $227 million worth of company shares in a secondary offering.
Zynga has just released a new S-1 in connection with its secondary offering and the recent acquisition of OMGPOP to show the gaming company's plans ahead of the end of the lock-up period which starts April 30.
The San Francisco gaming company is looking to sell up to 43 million shares and CEO Mark Pincus will sell 15% of his shares, which based on yesterday’s stock price is around $227 million. This change will lower Pincus’ voting power from 36.5% to 35.9%, according to the new filing.
Zynga stock (NASDAQ:ZNGA) dropped more than 5% once the markets opened, just after the S-1 filing went live -- the stock closed yesterday at $13.74 and dipped to $13.05 in early morning trading.
Also looking to sell some stock in the company that debuted on the NASDAQ in mid-December were investors IVP, SilverLake, Union Square Ventures, Google, Reid Hoffman. And within the company, board member Jeffrey Katzenberg, General Counsel Reggis Davis, COO John Schappert and CFO Dave Wehner are also selling shares.
We pointed out a few weeks ago that Zynga is trying to manage the lock-up period for employees and would be prepping a secondary offing as a part of this management. The company said it was doing this offering in order to “facilitate an orderly distribution of shares and to increase the company’s public float."
Often companies will cushion and expected period of employees selling stock, especially in the 120-180 days following the IPO with a second offering so that the stock price isn't heavily effected by some investors looking to get some cash.
Since Zynga went public on December 16, the stock has had a tumultuous time on the public exchange, ini tally breaking through its IPO price on the first day and closing at $9.50. Then the company stock jumped 15% after Facebook filed for its IPO and disclosed that Zynga was responsible for 12% of its revenue. But days after the announcement, the company stock slipped again to just above $12. Then the company hit an all-time high the day after it announced it would debut its own gaming platform at Zynga.com (breaking $15.50).
Also within this S-1 filing are a few more details about the deal announced this week that Zynga bought OMGPOP. The purchase came just days after OMGPOP topped the app charts with its Pictionary-like hit Draw Something. While many were estimating that the deal was closed for near $210 million, the filing clarified that Zynga bought the game developer for a “purchase consideration of approximately $180 million.”
That's 180 big ones in cash -- it looks like Zynga is still fairly liquid.
Zynga stock felt a modest bump on Wednesday after word leaked that it purchased the newly crowned most-used mobile app, but now the company is countering that positive bump with the concerns about a secondary offering and the scrutiny over whether buying any 'ol app that tops the charts is a good way to conduct business.
At this point, Draw Something monetizes the app with front-loaded downloads and purchases like color packs whereas Zynga is more accustomed to in-app purchases that are disposable like virtual currency -- so users are always needing to refill and level-up. Those business-models are night and day and could prove to be an issue when comparing the app revenue head-to-head in future quarters.
Draw Something, recently hit 15 million daily active users in under six weeks and claims that it has facilitated 1 billion drawings done since the game launched. That's a lot of growth, but clearly not enough to prove staying power. But, for Zynga, this is the biggest acquisition to date and shows that the company is ready to shake up the industry more than ever.