Reuters: Private Equity: REFILE-UPDATE 3-Zynga stakeholders to sell shares, stock falls

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REFILE-UPDATE 3-Zynga stakeholders to sell shares, stock falls Mar 23rd 2012, 16:57 Fri Mar 23, 2012 12:57pm EDT * Large shareholders, including CEO, to sell 43 mln shares * Secondary offering follows December IPO * Zynga stock falls 4.3 pct By Liana B. Baker March 23 (Reuters) - Zynga Inc said on Friday that some of its largest insider stakeholders, including Chief Executive Mark Pincus, planned to sell 43 million shares worth about $591 million in a secondary offering. Shares of Zynga, which went public in a highly anticipated initial public offering in December, were down 4.3 percent to $13.16 in Friday afternoon trading. Pincus, who did not sell shares in December's IPO, will reduce his stake by selling 16.5 million shares, and will pocket roughly $227 million, according to a regulatory filing. The company had previously said it would hold a secondary public offering but only disclosed on Friday who the participants would be. "It is never a positive to see a founder sell off shares," said Sterne Agee analyst Arvind Bhatia. After the secondary offering, Pincus will hold 36 percent of the voting power and 13.1 percent of the company's stock, according to the filing. "Pincus's ownership stake and his control stake is so significant that it really shouldn't change the basic tenets behind the company," said Bank of Montreal analyst Edward Williams said. Other participants in the sale will include Chief Financial Officer Dave Wehner, Chief Operating Officer John Schappert, board member and LinkedIn founder Reid Hoffman, and the venture capital firm Union Square. Google Inc will sell 3.96 million shares, worth more than $50 million. Zynga will not receive any proceeds from the sale. Investors are typically expected to wait about six months after an initial public offering to sell their shares but Zynga waived a "lock-up" arrangement to let the offering take place. A "lock-up" period during an IPO means that certain investors with a large number of shares are usually not able to sell their stock until a pre-arranged date. Morgan Stanley and Goldman Sachs are the lead underwriters on the offering. Zynga has seen its shares rise 31 percent since its initial public offering in December. It is trying to minimize its dependence on Facebook and announced its biggest-ever acquisition on Wednesday, buying OMGPOP, maker of the popular game "Draw Something." The company on Friday said it paid $180 million in cash for OMGPOP, a New York-based company that was considered obscure until about six weeks ago when its "Draw Something" game hit the mobile market. The sudden success of "Draw Something", which amassed 35 million downloads, could be a boon to Zynga. But Bhatia, the Sterne Agee analyst, said Zynga overpaid for OMGPOP. "While the quick success of 'Draw Something' is certainly impressive, we believe it is too early to tell how well the game will monetize," he said in a research note on Thursday. In another bold move to diversify its revenue stream, it launched in March a new gaming service allowing users to make personal profiles and play games outside of Facebook. Six games publishers, including Japan's Konami Corp have signed on to make games for the fledgling service. Zynga said on its website on Friday that 1.5 million players were currently playing its games. Link this Share this Digg this Email Reprints

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