Zynga stock setup gives CEO overwhelming power

Ronny Kerr · August 26, 2011 · Short URL: https://vator.tv/n/1e4b

Founder's stock, possibly equivalent to Class C stock described on S-1, gives CEO 70 times vote

Social gaming behemoth Zynga is reworking its stock structure to give CEO Mark Pincus 70 times the voting power of shareholders that purchase stock in the company’s IPO, according to findings by Bloomberg.

Zynga has declined to comment on the report.

Under the board-approved three tier stock structure, each of Pincus’ shares would be worth 70 votes. In comparison, shares held by pre-IPO investors would each be worth seven votes and shares purchased by public market investors would be worth one vote each.

This could explain what is written on Zynga’s S-1 filing as “founder’s stock,” of which Pincus--and Pincus alone--holds 20.5 million shares. In addition to that Class C stock, the CEO holds 91.3 million shares of Class B stock. Though the company won’t confirm, this would mean that one in five Zynga shares owned by Pincus holds an unprecedented amount of voting power.

In contrast, all of Zynga’s investors own shares of Class B stock, which will hold seven times the voting power of IPO stock. As a reminder, those investors include Kleiner Perkins Caufield & Byers, William “Bing” Gordon (of KPCB), Foundry Group, Brad Feld (of Foundry Group), Institutional Venture Partners (IVP), Union Square Ventures, Avalon Ventures and DST.

Zynga filed to go public back in July and aims to raise as much as $1 billion, but has not yet indicated when the offering will come.

Since then, the company has been hard at work expanding its games beyond the Facebook platform. Socially, that has translated as bringing Zynga Poker to Google+ as part of the first wave of games to reach the new social network.

Beyond social, however, Zynga has been amping up its mobile arm as well. Mid-June saw the launch of CityVille Hometown, a mobile spin on CityVille, still Facebook’s most popular app with 75.5 million monthly active users. And last week, there were reports that Zynga had snapped up the team behind Astro Ape Studios, a New York City-based mobile social game developer.

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Zynga is the largest social gaming company with 8.5 million daily users and 45 million monthly users.  Zynga’s games are available on Facebook, MySpace, Bebo, Hi5, Friendster, Yahoo! and the iPhone, and include Texas Hold’Em Poker, Mafia Wars, YoVille, Vampires, Street Racing, Scramble and Word Twist.  The company is funded by Kleiner Perkins Caufield & Byers, IVP, Union Square Ventures, Foundry Group, Avalon Ventures, Pilot Group, Reid Hoffman and Peter Thiel.  Zynga is headquartered at the Chip Factory in San Francisco.  For more information, please visit www.zynga.com.


Mark Pincus

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