Zynga’s Mark Pincus cashes in after 15 years of boom-bust cycle

Mark Pincus, chief executive officer of Zynga Inc., speaks during an event at Zynga Inc. headquarters in San Francisco, California, U.S.

David Paul Morris | Bloomberg | Getty Images

In the 15 years since he started Zynga as a poker game for Facebook, Mark Pincus twice gave up the CEO role while guiding his gaming company through early rocket ship growth, a historically disappointing post-IPO stretch and a choppy history of pricey acquisitions.

But one thing he never did was dump the majority of his stock.

Following Take-Two Interactive’s announced acquisition of Zynga on Monday for $12.7 billion, Pincus is inline to be the biggest individual beneficiary, thanks to his continued ownership of about 5% of his company’s outstanding shares.

According to the latest SEC filings, Pincus owns 55 million Zynga shares. With Take-Two agreeing to buy Zynga for $3.50 a share in cash and $6.36 a share in stock, Pincus is poised to pocket about $193 million while still owning roughly $350 million worth of Take-Two equity.

Take-Two’s purchase price equates to a premium of 64% to Zynga’s closing price on Friday, giving Pincus’s net worth a big boost.

Still, this isn’t how the story was supposed to unfold.

Prior to its IPO in 2011, Zynga was about the hottest ticket in Silicon Valley. Its flagship game, FarmVille, was printing cash, as consumers spent real money building digital worlds and dressing up their avatars. In the first three quarters of 2011, revenue surged to almost $830 million, up seven-fold from full-year revenue in 2009. FarmVille accounted for 27% of sales.

Paul Martino, a venture investor who backed the game developer in its first financing round in 2007 said that, between 2008 and 2011, Zynga got more chatter than any other company in Silicon Valley. In particular, during the financial crisis, venture capitalists weren’t putting money into much of anything, but Zynga was still raising cash.

Heading into the IPO, Kleiner Perkins was so bullish on Zynga that in early 2011 it increased its stake by buying shares at $14, valuing the company at $12 billion. The stock debuted below that, at $10, and surpassed $14 a few times in early 2012.

But Zynga’s early growth relied entirely on Facebook — the company’s games spread virally by using the social network for distribution. When Facebook started exerting greater control over the platform, it limited third-party developers from promoting their services, exposing Zynga’s principal weakness. Between 2012 and 2014, Zynga’s revenue fell by half.

The stock lost 75% of its value in 2012 and never fully recovered.

“Once it became such a big success out of the gate, there was belief that Zynga could transcend being a game company into being so much more,” said Martino, a managing partner at Bullpen Capital. “But ultimately, it’s a game company and got bought as a game company.”

Martino admitted that the stock performance was disappointing. Even with the high premium Take-Two is paying, it’s still less than the IPO price.

“But if you told us in 2007 that the company would be bought at a $12-$13 billion number, I have to imagine we probably would have been pretty happy about that,” he…

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