Market Overview

Zynga Pops, Then Drops on Facebook M&A Rumors

Zynga Pops, Then Drops on Facebook M&A Rumors

Shares of social gaming company Zynga (NASDAQ: ZNGA) experienced a wild ride during Monday's trading session after rumors circulated that Facebook (NASDAQ: FB) may be looking to acquire the gaming company.

According to Seeking Alpha, Facebook could acquire Zynga because the price is attractive. Shares of Zynga are down over 67 percent since the beginning of the year.

Zynga shed about 40 percent off its valuation since it reported poor earnings and slashed its fiscal-year guidance Wednesday afternoon.

Zynga and Facebook have always been highly levered to each other. About 29 percent of Zynga's revenues come from Facebook. Facebook recently changed the way it advertises social apps and games on its site, making it less likely to see an advertisement for Zynga or for apps or games from other companies. This has hurt Zynga as the company's most recent quarter and future guidance was substantially lower than expected.

On July 25, Zynga reported second-quarter EPS of $0.01 versus the estimated $0.06 per share, missing by 83.3 percent. Revenues came in at $332 million versus the estimated $344.12 million, missing by 3.5 percent. The social gaming company also lowered its fiscal-year earnings guidance to $0.04-0.09 per share. It originally saw its yearly EPS between $0.23-0.29.

Seeking Alpha also mentioned that Facebook needs to do something substantial, as shares continue showing weakness since its essentially failed IPO on May 18, in order to reaffirm dominance in the social media industry.

Shares of Zynga traded up nearly 2 percent after the rumors circulated but subsequently traded down over 2.75 percent at about $3 per share around the time of posting.

Zynga is a provider of social game services with 240 million average monthly active users over 175 countries. The company develops, markets and operates online social games as live services played over the Internet and on social networking sites and mobile platforms.

Facebook is engaged in building products to create utility for users, developers, and advertisers.

Posted-In: Seeking AlphaEarnings News Rumors M&A Events Media Best of Benzinga

 

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