Zynga Inc (NASDAQ: ZNGA)
Zynga has had a rough time in the market as of late. However, the stock is definitely seeing growth today. Yesterday, after the closing bell, it was announced that the CEO of the company would be stepping down and that a new CEO has been appointed. Today, we’ll talk about the struggles the company has faced, the new CEO, how the market reacted to the news, and what we can expect to see from ZNGA moving forward.
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ZNGA Has Faced Some Very Big Problems
Zynga created a blockbuster game known as Farmville years ago that put them on the map. However, since then, we haven’t seen much from them. Sure, there have been games, but none of them have been very addictive. A while ago, the company announced that it is working to develop two games that are likely to be big hits. Those games are “CSR2” and “Dawn of Titans”. However, because the company has seen a few games flop at this point, they are relatively strapped for cash. In fact, the company is selling their $530 million main office in an attempt to free up some cash flow. So, all in all, ZNGA has one big problem – thus far, it is relatively similar to a one-hit wonder musician, and at this point, cash is running out!
ZNGA CEO Shakeup
Ultimately, any time a company isn’t doing well, it falls on the company’s CEO. Without strong leadership, we won’t see much positivity. So, it’s no surprise that ZNGA founder, Mark Pincus, has made the decision to step down from his position as CEO. This move will be effective on March 7th when Pincus will become the executive chairman and Frank Gibeau will takeover as CEO of the company. Gibeau has more than 20 years of experience in the gaming industry with Electronic Arts (EA). Most recently, Gibeau served as the executive Vice President of EA Mobile. Based on his history, he may have the ability to turn the company around. In a statement, Pincus had the following to say:
“I recruited Frank seven months ago to become an active board member to advise and coach our teams… [W]e have worked well together and share a common vision for Zynga around mobile and social gaming.”
Following up, Gibeau had the following to say:
“Dispite the success of mobile games, Mark and I believe that the full promise of Zynga and social gaming has yet to be fully realized… We believe that Zynga has an opportunity to create new social experiences to connect even more players together.”
How The Market Reacted To The News
As investors, we know that the news moves the market. In this case, we’re talking very big news. You see, investors have been worried about ZNGA for quite some time. The company just couldn’t seem to find solid footing. It’s not often that we see founders stepping down to bring in CEOs because it’s the right thing to do. In this case, it definitely is the right thing to do, and investors are applauding the decision. Currently (10:12), ZNGA is trading at $2.29 per share after a gain of $0.12 per share or 5.79% thus far today.
What We Can Expect To See From ZNGA Moving Forward
Moving forward, I have a relatively bearish opinion of what we can expect to see. While it is good that the company has named a new CEO, ZNGA is cash strapped, and that will likely lead to further struggles down the road. However, I will admit that the company does have the ability to create a blockbuster if it can only get the funding going. Really, I think that a lot of the company’s success is going to ride on the sale of their main office. That $530 million could go a long way when it comes to paying employees to get the games in the works up and running quickly. So, in the long run, there’s definitely potential. However, in the short term, I’d definitely stay away!
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What Do You Think?
Where do you think ZNGA is headed moving forward? Let us know your opinion in the comments below!
[Image Courtesy of YouTube]