Jana Partners buys up loads of Zynga and Groupon shares

Announcement sent both stocks up, but Groupon still ended down for the day

Zynga and Groupon are two companies that, honestly, could use a little help. Both companies went public in 2011, with lofty goals in mind, but have severly stumbled ever since. 

And they both finally got it in the form of Jana Partners, which acquired millions of shares of both companies, according to a report by Reuters Wednesday.

Jana Partners purchased 25.5 million shares of Zynga stock and 21.9 millon shares of Groupon.The Zynga investment was valued at around $86 million, and the Groupon investment valued at $134.3 million, according to a filing with the Securities and Exchange Commission.

The investment has a rosy effect on both stocks, though not a lasting one for Groupon. 

After news of the investment hit, Zynga stock soared nearly 9%, hitting a high of $3.63 a share, its biggest intraday gain since April 26. The stock ended the day up 3.15%, or 11 cents, to $3.44 a share.

Groupon saw similar gains, climbing over 5.5 percent, hitting a high of $7.38 in midday trading. But those gains were all erased by the end of trading, and the stock actually ended the day down .44%, or 3 cents, to $6.86 a share.

Zynga's stock is down 64% from its initial public offering price of $10 in December 2011, and Groupon is down 67% from its $20 IPO price in November 2011.

While the investment from Jana might be the shot in the arm that both companies needed, it will not come free. Jana Partners is a fund that is known for pressuring the companies it invests in to change their business strategies or to sell themselves. What exactly that will entail for Zynga and Groupon remains to be seen.

Both Zynga and Groupon are currently going through a bit of a transition as it is.

Zynga, which was propelled to the top of the social gaming scene through its close association with Facebook, has now seen that relationship erode. And the company is now being forced to prove to investors that it can succeed in the mobile world as well.

In its most recent quarterly earnings, Zynga beat Wall Street expectations, but its revenue and bookings were down year-to-year, as were both daily and monthly active users.

Zynga reported GAAP revenue of $264 million, down 18% from $320 million at the same time last year. Bookings were $230 million, down 30% from $329 million in Q1 2012. The company also reported non-GAAP earning per share came of $0.01.

Analysts had been expecting to see a loss of 4 cents per share on revenue of $209 million.

But the company's stock dropped 6% the next day, due to investors fearing a slow transition into a company that is fully focused on mobile gaming.

"Zynga is unlikely to ever dominate the mobile gaming market in the same way that it has the web-based gaming market for many years," Wedbush Securities analyst Michael Pachter said following the release.

Groupon is undergoing a transformation into a mobile company as well, though it so far seems to be going about it more successfully than Zynga, at least for now.

The company, which recently fired CEO Andrew Mason, reported in its first quarter earnings report that nearly half of all North American Groupon transactions are now coming from mobile. That’s up from 30% this time last year.

In addition the report showed the best quarter the company had seen in a year.

Non-GAAP operating income (excluding stock compensation) came in at $51.2 million, or $0.03 a share on revenue of $601.4 million. Street consensus called for non-GAAP operating income of $29 million on revenue of $591.3 million.

Zynga, Groupon and Jana Partners could not be reached for comment. 

(Image source: https://www.janapartners.com)