Zynga Inc Investors Not Liking The Management Change

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Zynga took the market by surprise when it announced that Chief Executive Don Mattrick will step down and founder Mark Pincus will be back to head the company in the midst of the struggles Zynga is going through. Following the news, shares took a dip by as much as 11%, falling to $2.58 per share in extended trading.

Zynga CEO to exit rich

Mattrick will make a few million even after exiting Zynga. According to a filing with the SEC, Mattrick will get $4 million as his severance package over the next two years. Also he will be getting a bonus for the number of days worked in 2015, which could amount to around $1 million. In addition, the game maker will vest a little over 5.1 million shares worth $10 million, thus bringing his total severance package to $15 million.

According to Zynga, Mattrick asked for an annual salary of $1 as CEO. Mattrick was with Microsoft’s Xbox business before joining Zynga, and now the company has confirmed that he will step down from the board as well.

What analysts feel

Sterne, Agee & Leach analyst Arvind Bhatia stated that the leadership change is negative for the company because there were some signs of progress visible under Mattrick.

Analyst Chris Merwin of Barclays said Zynga has to prove now that it is able to run even during a change in leadership. The game maker has been seeing a lot of activities since 2012, but nothing has turned out positive for the company yet as gamers decided to abandon its lucrative, Facebook-based desktop games for mobile games from new entrants such as King Digital, maker of Candy Crush Saga.

When it was founded in 2007, Zynga became one of Silicon Valley’s fastest growing companies, but it failed to retain its glory. The company posted a loss of $226 million last year, and non-GAAP revenue dropped $694 million from $1.15 billion in 2012. Additionally, the company is defending a lawsuit that alleges it of defrauding shareholders about its prospects before and after its December 2011 initial public offering (IPO).

On Wednesday, Zynga shares closed up 3.57%, while in extended trading, the stock was down by over 11%.

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