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Analyst: Stock Market Values Zynga At Below Zero

By - Source: LA Times | B 17 comments

Zynga may hold the title of most popular Facebook application developer with 327 million monthly active users, but it appears investors care very little about this fact.

J.P. Morgan analyst Doug Anmuth recently stated that Zynga's market capitalization, about $1.87 billion at the time of this writing, has fallen below the total value "of the cash it has on hand, the securities it owns, and the amount it paid in March for its San Francisco headquarters." At the end of June, Zynga's total assets were value at about $2.7 billion, which means that the market values Zynga's actual business at below zero.

A report published by the LA Times cited additional negative analyst notes, one of which raised the concern of "significant" layoffs in the coming months. At this time, it appears that Zynga has lost all investor confidence and will need a major turnaround to regain the trust it once had.

That turnaround may not come soon enough, as the company announced last week that it expects to report a net loss of between $90 million and $105 million for the fourth quarter, mainly due to a $85 million to $95 write-down on the Draw Something acquisition. Zynga also lowered its full-year outlook to revenues of $1.085 billion to $1.100 billion, down from $1.150 billion to $1.225 billion. The shortfall was attributed to delays of "several" games as well as "reduced expectations for certain web games including The Ville."

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  • 24 Hide
    esrever , October 11, 2012 10:41 PM
    $0 is how much I value zyanga, glad to see someone agrees.
  • 16 Hide
    zomow , October 11, 2012 10:45 PM
    Over-hyped stock is over-hyped.
  • 12 Hide
    grimworld , October 11, 2012 10:51 PM
    Who's to blame? People can only tolorate so so many "ville" games. Be creative for once
Other Comments
  • 24 Hide
    esrever , October 11, 2012 10:41 PM
    $0 is how much I value zyanga, glad to see someone agrees.
  • 16 Hide
    zomow , October 11, 2012 10:45 PM
    Over-hyped stock is over-hyped.
  • 5 Hide
    mikenygmail , October 11, 2012 10:49 PM
    Wrong, the stock market values ZNGA at $2.45 per share.
    That's the current price right now in after hours.
    You could buy it for $2.46 per share, or sell it for $2.44 per share.

    If we are to believe the analyst, then ZNGA would be an easy short.
    Things are rarely that easy in the stock market, which is heavily manipulated.
  • 12 Hide
    grimworld , October 11, 2012 10:51 PM
    Who's to blame? People can only tolorate so so many "ville" games. Be creative for once
  • 1 Hide
    aftcomet , October 11, 2012 10:58 PM
    mikenygmailWrong, the stock market values ZNGA at $2.45 per share.That's the current price right now in after hours. You could buy it for $2.46 per share, or sell it for $2.44 per share.If we are to believe the analyst, then ZNGA would be an easy short.Things are rarely that easy in the stock market, which is heavily manipulated.


    Exactly. Jokes aside if this stock were valued below zero I'd go get 10 mortgages and buy it because there is an extreme inefficiency in the market and I want to cash in.

    I hate Zynga but from a business perspective, if you can generate money from fools by churning out trash games that are simply reskinned (Angry Birds -> Angry Pigs), then why not?
  • 7 Hide
    raytseng , October 11, 2012 11:08 PM
    i'm not sure if people misread the article are actually trying to make some odd point.

    yes headline is misleading, but article explains that their "business" is valued at zero, or negative.

    So YES, you go take out a $1.87billion loan, buy every share of zynga. Then if you can liquidate all the office equipment and other physical stuff for it's amortized value, and get someone to takeover your lease(s) on the buildings with no time gap, then YES you break even.
    (of course this is making the assumption they don't have poison pills to prevent a takeover, and every share is for sale).

    But yea, that is exactly how I read the article.

    What the valuation is saying is that the analysts believe the direction of the company is currently to just burn and lose more value and money.
  • -2 Hide
    aftcomet , October 12, 2012 12:08 AM
    raytsengi'm not sure if people misread the article are actually trying to make some odd point.yes headline is misleading, but article explains that their "business" is valued at zero, or negative.So YES, you go take out a $1.87billion loan, buy every share of zynga. Then if you can liquidate all the office equipment and other physical stuff for it's amortized value, and get someone to takeover your lease(s) on the buildings with no time gap, then YES you break even. (of course this is making the assumption they don't have poison pills to prevent a takeover, and every share is for sale). But yea, that is exactly how I read the article.What the valuation is saying is that the analysts believe the direction of the company is currently to just burn and lose more value and money.


    If I could buy their company for 1.87B and they have assets valued at 2.7B then I'd be doing a lot more than breaking even.
  • 4 Hide
    raytseng , October 12, 2012 12:20 AM
    lol, although the assets of 2.7B was in June. If they have full time employees shoveling cash just straight into the fire for the past 4months, that might have turned out better.
  • 4 Hide
    stingstang , October 12, 2012 1:15 AM
    At this point my dad would tell me (if I invested stock in the company) "Just keep you money in there. The stock will go back up."
    ...I really hate him.
  • 0 Hide
    A Bad Day , October 12, 2012 4:15 AM
    stingstangAt this point my dad would tell me (if I invested stock in the company) "Just keep you money in there. The stock will go back up."...I really hate him.


    One of my parent's friends invested in Enron back when the stock price was in the high 80s.

    How sour they were...
  • 0 Hide
    mylloc , October 12, 2012 4:43 AM
    Hi-risk hi-gain, low-risk low-gain. Thats how we play. Many people dont know how they work.
  • -1 Hide
    aftcomet , October 12, 2012 4:46 AM
    raytsenglol, although the assets of 2.7B was in June. If they have full time employees shoveling cash just straight into the fire for the past 4months, that might have turned out better.


    Your post doesn't make any sense.
  • 1 Hide
    martel80 , October 12, 2012 6:16 AM
    I guess the point this article is struggling to make is that the current liquidation value of the company may be higher than its current market cap?
    So basically all what the company does is worthless. :) 
  • 0 Hide
    rosen380 , October 12, 2012 1:32 PM
    http://www.sfgate.com/technology/dotcommentary/article/Free-falling-Zynga-needs-fast-turnaround-3796892.php

    That article, from two months ago, cites some similar numbers, but they have the $2.7B in assets plus ~$0.85B in liabilities coming out to $1.86B. Does that mean that the $1.87B market cap actually just means the business, assets excluded, is just "nearly" worthless [about $10M], not worth less than zero?
  • 0 Hide
    misterawsome , October 12, 2012 10:48 PM
    i'll buy all the stock brilliant
  • 0 Hide
    misterawsome , October 12, 2012 10:49 PM
    aftcometExactly. Jokes aside if this stock were valued below zero I'd go get 10 mortgages and buy it because there is an extreme inefficiency in the market and I want to cash in.I hate Zynga but from a business perspective, if you can generate money from fools by churning out trash games that are simply reskinned (Angry Birds -> Angry Pigs), then why not?
    why would you need 10 mortgages its free
  • 0 Hide
    abbadon_34 , October 14, 2012 6:04 AM
    ripe for a hostile takeover