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Report: Zynga Alters Stock Structure To Give CEO More Voting Power
Report: Zynga Alters Stock Structure To Give CEO More Voting Power
August 26, 2011 | By Mike Rose

August 26, 2011 | By Mike Rose
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Social games giant Zynga is changing its stock structure around to give CEO Mark Pincus 70 times more voting power than any other shareholder in the initial public offering.

Zynga's board of directors approved a new three-tier approach for the stock structure, increasing Pincus' shares to 70 votes, up from his original 10, according to documents acquired by financial website Bloomberg.

In comparison, pre-IPO investors will get seven votes for each share, up from the original single vote they were originally allowed. All other public investors will still receive the standard one vote per share.

Lise Buyer, a principal at IPO advisory firm Class V Group, told Bloomberg that the move by Zynga may be in aid of keeping too large a share of the voting power from shareholding staff members.

"Zynga has invented something new," she said, noting that having three tiers of stock is "unprecedented" for the average technology company.

Zynga filed an S-1 with the SEC indicating its desire to issue an initial public stock offering "as soon as is practicable" back in July, with the company estimating aggregate initial sales of $1 billion in class A common stock.


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Comments


Aaron San Filippo
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Minor note, but 10 * 70 is 700 :)

Mike Rose
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Hey Aaron,



the 10 figure actually refers to the voting power which Pincus originally had. As mentioned lower in the article: "All other public investors will still receive the standard one vote per share." Hence, each of Pincus' shares are worth 70 times more voting power than each of the standard shares :)



Mike

Jeffrey Crenshaw
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Does that mean they cost him 70 times as much? I'm confused, why didn't he just buy (or set aside, since I guess he already owns them) seventy times as many shares?



...



Is this legal? What value does a share have if those already in power can just decide theirs are more valuable than yours?? I assume this sort of thing can't happen after the IPO?

Joe Wreschnig
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For a private company, stocks can be "worth" - in money, voting power, hamburgers, etc. - whatever the board of directors deems. If the board prices the stocks too high or too inequally, it may scare off investors. On the other hand, it may not; essentially this moves gives Zynga more flexibility in offering stocks without the risks of the shareholders (who presumably do not understand the games industry that well) ousting a board (who presumably do).



To just give Pincus 70x more shares at this late date would devalue the rest of the shares, which is probably not acceptable to investors.



It is however not a normal move, as the article says. Whether the SEC will be happy remains to be seen.

Leo Gura
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Wallstreet is a legalized pyramid scheme. Pump and dump.

Martain Chandler
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July 4th, 2015.


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