Lessons from the Zynga IPO

December 22, 2011
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Zynga is out with its IPO at $ 9.5 per share with total market capitalization of the company around $ 7 billion. The Zynga model we had prepared when it filed the S-1 with SEC some three month back, had indicated a price of $ 9.6/share which was quite on the lower side when compared with the market expectations.

Apart from discussing the major turnoffs for the equity investors, we had also emphasized on the importance of good relationship with the Facebook for Zynga’s health. I think the success of Zynga at least for now is completely dependent on the health of Facebook. So everything boils down to good relationship between Mark Pincus, a Harvard graduate and Mark Zuckerberg, a Harvard drop-out. Perhaps that’s the reason Mark Pincus has secured most of the voting rights with him. Let’s dig deeper and see the detailed share holding structure of Zynga.

Share-Holding Structure of Zynga
Class of Shares Voting Rights/Share % of Shares Holding % of Voting Power
Class-A 1 14.6% 1.8%
Class-B 7 18.4% 72.0%
Class-C 70 3.0% 26.2%
* Class C shares get a surprising 70 votes per share fully owned by the CEO Mark Pincus
  • Mark Pincus and the executives of the Zynga hold entire equity shares of class B and C
  • They together represent 85.4% of total equity share holding with cumulative 98.18% of the voting power
  • Mark Pincus, the CEO of the company alone holds 37.8% of the total voting power even though his equity stake is just 16.3%.
  • The Class A shares being offered represents only 14.6% of total equity share holding with just 1.8% voting rights, significantly lower than the other classes

Now the question arises whether Zynga is playing a fairgameVille with the Class-A equity holders or is it in the mood of playing Mafia Wars with the shareholders’ facebook credits?

The shareholding structure above clearly tells us the answer!!

You can view the entire summary of the share holdings here.


About the Author

Anil Bains has developed end-to-end financial models for Real Estate, FMCG, Power, Roads and Telecom Sector and released them as Open Source. He has extensive experience in the financial services, analytics and training domain. Apart from making Financial Modeling simple and accessible for the masses, Anil loves playing volleyball and has a mean spike.

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