Zynga is holding a secondary offering of its 42.97 million shares set to price at $12 per share according to a regulatory filing Wednesday evening. All of the shares will be sold by existing stockholders and Zynga will not receive any proceeds from the sale of shares.
The purpose of this secondary offering is that the giant San Francisco-based gaming company is trying to manage the lock-up period for employees that could negatively affect the company’s share price if they wish to liquidize some of their stock in the business.
The company's lead underwriters, Morgan Stanley and Goldman Sachs, also have the option to buy an additional 6.4 million shares from the selling shareholders.
Zynga’s chief operating officer, John Schappert, who joined the company last April, is selling 322,350 shares, or about 45% of his stake. The company’s chief financial officer, David M. Wehner, who joined in 2010, plans to sell 386,865 shares, which is more than half of his holdings.
In total, Zynga’s directors and executive officers are unloading about 21 million shares.
Other sellers include the investor Reid Hoffman, and the venture capital firms Institutional Venture Partners and Union Square Ventures.
The company said that it’s doing this to “facilitate an orderly distribution of shares and to increase the company’s public float,” and try to avoid a stock plummet when employees look to get their hands on some capital from their holdings -- this happened to other companies with recent initial public offerings.
In the latest filing, Zynga said: As part of the offering, all selling stockholders, as well as all officers and directors, have agreed to lock-up agreements that extend the transfer restrictions on their shares until at least 90 days following the offering. The principal purposes of the offering are to facilitate an orderly distribution of shares and to increase the company’s public float. Zynga will not receive any proceeds from the sale of shares in this offering.
Zynga has been busy staying at the top of the gaming usership and download chats since it acquired OMGPOP earlier this week, getting its hands on the No. 1 mobile app, Draw Something and now there is word that Zynga is eyeing Glu Mobile, makers of Contract Kill: Zombies and Gun Bros.
The Zynga secondary pricing is slightly below the current market value of the company’s shares, which is $12.24.
This move will also allow insiders to sell a large block of shares well ahead of Facebook’s highly anticipated offering, which is expected in May.
Shares of Zynga fell about 6% on Wednesday, closing at $12.24.