Zynga Planning Secondary Offering To Prevent Share Dumping

Zynga went public last year with a $1 billion IPO that set the social games developer up for a year of rising profits and increased customer base. It seems its shareholders have other plans. Bloomberg...
Zynga Planning Secondary Offering To Prevent Share Dumping
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Zynga went public last year with a $1 billion IPO that set the social games developer up for a year of rising profits and increased customer base. It seems its shareholders have other plans.

Bloomberg heard from two separate sources that Zynga will be holding a secondary offering of shares to the shareholders. This would extend the “lock-up” period where shareholders wouldn’t be able to sell.

This news comes on the heels of Zynga’s stock being downgraded by J.P. Morgan. It wasn’t exactly a bad thing that the stock was downgraded. At the time, J.P. Morgan said they were positive about the prospects of the newly announced Zynga platform, but it would take time for it to take hold.

The downgrade could have had an effect on shareholder’s expectations nonetheless. They could be wanting to sell now instead of taking a chance in a market that some people think may just be a fad.

As of writing, Zynga’s stock is down 38 cents to $13.38 per share. Looking at Google Finance, we can see Zynga’s stock take a visible drop after the news of the secondary offering. It wasn’t a big drop, but it was a drop nonetheless.

Zynga Planning Secondary Offering

The expanded “lock-up” with a secondary offering could give Zynga the time it needs to show the potential of their Zynga Platform. Launching a new platform is never kind to any company’s stocks so this could be the best option the company has at this point.

Regardless, Zynga will bounce back. There are some companies that one may consider too big to fail. Considering that Zynga generated about 12 percent of Facebook’s revenue last year, I think they’re pretty safe for the time being.

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