Desperate Zynga gives all employees stock options

Steven Loeb · August 11, 2012 · Short URL:

Stock down 71% from IPO; Zynga tries to keep employees from leaving

Poor Zynga. Once the crown jewel of game development companies, the company seems to be sinking so fast that those in charge are desperate to hold on to employees.

With a huge drop in the company's shares, investigations and lawsuits, things are clearly not going so well. So it shouldn't be a surprise that many at the company are itching to leave, so reports say.  

On Friday, Bloomberg reported that the company is offering incentives to its employees in an attempt to prevent a “mass exodus,” as Arvind Bhatia, an analyst at Sterne Agee & Leach, called it.

Employees were given stock options after the company’s less than stellar earning report on July 25. While options and cash bonuses are apparently routinely given out at Zynga, this is the first time that the company has given equity to its entire staff.

And Zynga has reason to worry.

Zynga’s Chief Operating Officer John Schappert resigned this past Wednesday. No explanation was given, with the company saying in an SEC filing that the resignation was “not tendered in connection with any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.”

When someone so high up in the company feels they need to jump ship at such a crucial time, it can’t inspire much confidence in lower level employees.

For the second quarter of the year, Zynga reported a loss of 3 cents a share, or a 1 cent profit on an adjusted basis, on revenue of that grew 19% to $332 million, far short of analysts' expectations of 5 cents a share on revenue of $345 million. Zynga also sharply reduced its forecast, dropping its full-year bookings to $1.15 billion to $1.23 billion. Zynga had previously estimated bookings to be $1.43 billion to $1.5 billion.    

As a result, Zynga stock dropped 40% in a single day.

Other recent embarrassments

After taking the hit on its stock, Zynga was then accused of insider trading when it was revealed that executives, and major investors, had sold off a significant amount of stock months before it crashed.

The company was then hit with a lawsuit by Electronic Arts, who claimed that Zynga has plagiarized EA’s signature game, The Sims Social, with its new game, called The Ville.

Zynga’s stock was down nearly 2% on Friday, losing six cents to $2.95. It is now down 71% from its $10 IPO in December. So, perhaps giving out stock options right now is not the best way to retain employees.

Zynga was not available for comment

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