When the news came out recently that Mark Pincus has returned as CEO of Zynga (ZNGA), replacing Don Mattrick, it was almost universally met with skepticism and derision.
Rich Greenfield of BTIG -- who has been negative on Zynga for several years -- stated that if Pincus wasn't the right leader before, why should investors think he's the right person now?
Several others commented that, while he was CEO, Pincus sold a number of shares when the stock was above $12 a few months before it dropped well below that level. The implied or direct connection they make is that Pincus knew the stock was going to tank and got his money out first. They are saying he put his interests ahead of those of shareholders.
I want to make a few points in response.
1. I thought Zynga (the stock) was going to do better after Mattrick was hired. That was a bad call. I was wrong. It hasn't after a little bit of a bump right after the news.
2. I underestimated just how hits-driven mobile gaming has become. In the days when Zynga was riding high, with its games being played so much on Facebook (FB), it was easier to promote new games to existing users. The nature of mobile gaming makes this much more difficult. Games have to stand on their own two feet and hope they catch a wave. Even if you catch lightning in a bottle, there's no guarantee a hit will last, as we saw with Glu Mobile's (GLUU) Kardashian game.
3. I think it's really unfair to imply that Pincus dumped stock because he knew it was going to tank. I don't believe that. This is a guy who started a company in July 2007. He sold stock in March 2012 -- almost five years later and after a big financial crisis with a new family. Why wouldn't he want some liquidity? Wouldn't you after five years of no liquidity? There's nothing wrong here. He didn't sell any shares in the IPO. He took his ownership stake down from 15.5% to 13%. If he was trying to get all his money out before everyone else, he did a terrible job.
4. I think everyone is forgetting just how quickly Zynga grew from nothing to being a huge tech company. He figured out how to combine casual games with the popularity of Facebook, before mobile took off, and it led to incredible growth from nothing in a few short years. Growing as fast as Zynga did, of course you'll make a lot of mistakes and overstaff or hire people who shouldn't be there. That's happened before and will happen again. I don't think you can say it was just luck that Zynga grew as fast as it did. Pincus saw an opportunity and capitalized on it when no one else did. He created unprecedented growth. He deserves full credit for that.
5. One of the reasons Pincus was able to make that growth happen was that he's incredibly well-connected. Pincus has been in San Francisco for a while. He knows everyone there. He piggybacked with Facebook because he knew it was going to be huge and he knew all the key people associated with it, including Mark Zuckerberg. Even if some gamer in Estonia had realized Facebook was about to take off, they likely couldn't have succeeded as much as Zynga did because they didn't have the connections Pincus had -- and still has.
6. Pincus has a great nose for trends. Facebook is a great example. Casual gaming is a great example. He obviously saw social networking before anyone else with his Tribe.net start-up. The first time I met Pincus was early 2013. We were chatting at the start of the meeting and he told me how he'd just subscribed over the weekend to Netflix (NFLX). He was talking about House of Cards and how big it was going to be. He was so positive about what Reed Hastings was doing at the company. A few weeks later, the stock exploded higher on good earnings and finally shook off its Qwikster malaise. Pincus still has his good sense of trends in tech.
I can't say for certain that Zynga will thrive under Pincus in his return. We haven't even heard from him since the transition was announced. He's due to talk in a few weeks on the next earnings call. The world of mobile gaming is very tough and competitive. I don't currently own the stock.
However, I think Pincus gets none of the credit he deserves for Zynga's amazing growth as a company and he gets undeserved criticism heaped on him. He is a brilliant tech guy with outstanding connections. Plus, he's still got a lot of skin in the game at Zynga. I'm excited to see what he comes up with.
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