This week has not been good for Zynga. After posting decent results for Q2, the company’s shares took a dive into previously unknown depths. The shares dropped to trading around $3 each and haven’t really recovered since.
To add insult to injury, a report from Yahoo News came out this week that says Zynga insiders knew about the coming collapse and cashed out before it happened. You may remember Zynga holding a secondary offering back in March. During that secondary offering, Zynga CEO Mark Pincus sold off 16.5 million shares for a total worth of about $225 million.
It didn’t stop there though. Yahoo News found that Zynga worked with their other partners to alert investors to the imminent implosion and told them to cash out. Who cashed out?
As the report from Yahoo points out, these guys didn’t sell all of their stake in the company. They lost a lot of money when Zynga tanked earlier this week as well. The cash out was probably just a way for investors to cushion the blow when the real crash happened this week.
While Zynga may be down at the moment, the company made it clear during their earnings release that they are dedicated to getting the company back on top. The social games developer has to cut their ties with Facebook while focusing on their own games portal at Zynga.com. They also have to start embracing mobile while making their games cross platform between the Web and mobile devices.
If Zynga can pull it off, they could climb back up to profitability while keeping investors happy. The social gaming scene isn’t dead by any means, but it is changing. Zynga will have to keep up with it just like everybody else. They could start by not buying obvious fads like Draw Something.