Rumor: Zynga to Introduce Employee Stock Sale Plan as It Waits On IPO [Confirmed]

Zynga is planning to let at least some employees sell a portion of their stock in the hot social gaming company to outside investors, according to two industry sources. Institutional Venture Partners, a late-stage venture firm that has already invested in the company, is the purchaser of all the employee stock going up for sale, one source tells us.

[Updates: Zynga has announced $180 million in funding led by DST, with hedge fund Tiger Global, Andreessen Horowitz, and IVP participating. The New York Times has also just published an article interviewing Zynga executives and board about the deal. The employee stock sale is on, and Zynga employees will be able to sell 10% of vested shares, at $19 per share, according to a new source. One of our previous sources clarifies that IVP has separately been buying up Zynga stock on secondary markets, while another source adds that $50 million has been allocated for the Zynga employee stock sale.]

We have asked Zynga for comment on these rumors multiple times in recent weeks, but we’ve gotten nothing back so far. However, given what we’ve heard, and what we know about Zynga’s strategy, an employee stock sale makes sense.

Facebook, home to tens of millions of Zynga users, let employees sell some stock this past summer to Russian investor Digital Sky Technologies. That move, and this one, are intended to let employees make some money from their hard work while inspiring them to stay around for a long time to come (and make money from the rest of their stock when the company goes public or gets sold). Neither Facebook nor Zynga are looking to make an initial public offering any time soon, we’ve heard consistently from sources in the last few months.

AppData.com - Zynga Facebook App Metrics

The gaming company is also hiring talented engineers and other employees quickly. It now has more than 600 employees as well as more than 300 independent contractors, the company has said. We and others estimate that it is on track to make more than $200 million this year, with some estimates we’ve heard going higher than that. Most revenue comes from selling virtual goods in a wide range of hit social game, like Texas Hold’Em, Mafia Wars, FarmVille, Café World, FishVille and most recently, PetVille. It also has large games on MySpace, other social networks and some on the iPhone.

On Facebook alone, we track 37 of Zynga’s dozens of applications through AppData. They combine for an unduplicated total of 232 million monthly active users, although this total does not reveal the number of users who play more than one Zynga game. A more interesting measure, perhaps is the fact that it has a combined 64.6 million daily active users on Facebook, or around 19 percent of Facebook’s monthly active users.

Although the company, like others in the industry, has run some scammy advertising offers in the past, it decided to pull them all last month. At that point, it said it planned to keep offers out “until we can control their inclusion and presentation ourselves,” according to chief executive Mark Pincus. This means the vast majority of the company’s revenue is coming from direct payments for virtual goods.

However much money Zynga is bringing in, it is also facing competition from many other growing social gaming companies — companies that are also making money, and can afford to pay well. This employee stock offering is not just a way to keep employees happy, but to preclude them from getting recruited by competitors.

Long-Term Plans

We don’t know how much of their stock Zynga employees are selling, nor the price (assuming that what we hear is accurate). However, we do have a couple other details from one source. Zynga itself may have raised a new $25 million round of funding at a $1 billion valuation — we’ve also heard that this is “way off.” Rumors about a $1 billion valuation have gone around already; we heard it in October, when rumors of a Zynga IPO were also circulating. Others have heard or estimated a similar valuation.

Separately, a regulatory filing for $15.2 million in funding surfaced in November. This was an extension of the company’s second round of funding; and, the money was actually raised in June at a $625 million valuation, according to one source. The $25 million, according to the source, is a new round.

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18 Responses to “Rumor: Zynga to Introduce Employee Stock Sale Plan as It Waits On IPO [Confirmed]”

  1. Will Zynga Use $180 MM Funding For Shopping – GigaOM says:

    [...] Silicon Valley investors including Institutional Venture Partners and Andreessen Horowitz. IVP, according to a report is rumored to by buying stock from employees looking to sell some of their holdings. DST, I am sure [...]

  2. Will Zynga Use $180 MM Funding For Shopping says:

    [...] Silicon Valley investors including Institutional Venture Partners and Andreessen Horowitz. IVP, according to a report is rumored to by buying stock from employees looking to sell some of their holdings. DST, I am sure [...]

  3. peHUB » peHUB First Read says:

    [...] a $180 million fundraise led by Russia’s Digital Sky, but it’s not quite done yet. Eric Eldon reports that the company is allowing employees to sell up to 10% of their vested shares at $19 each, to [...]

  4. Farmville'in Yapımcısı Zynga, DST'den 180 Milyon Dolar Yatırım Aldı! | Webrazzi says:

    [...] DST’nin yaptığı yatırıma dair The New York Times’ın paylaştığı bilgiye göre, DST ilk olarak şirket çalışanlarının ve önceki yatırımcılarının hisselerinin bir kısmını satın alacak sonra da şirket hisselerini üzerine geçirecek. Şirket çalışanlarının hisselerinin satın alınabileceği söylentileri zaten dün farklı kaynaklara dayandırılarak Inside Social Games sitesinde de konu olmuştu. [...]

  5. Farmville’in Yapımcısı Zynga, DST’den 180 Milyon Dolar Yatırım Aldı! | Aruha says:

    [...] DST’nin yaptığı yatırıma dair The New York Times’ın paylaştığı bilgiye göre, DST ilk olarak şirket çalışanlarının ve önceki yatırımcılarının hisselerinin bir kısmını satın alacak sonra da şirket hisselerini üzerine geçirecek. Şirket çalışanlarının hisselerinin satın alınabileceği söylentileri zaten dün farklı kaynaklara dayandırılarak Inside Social Games sitesinde de konu olmuştu. [...]

  6. Rumor: Zynga to Introduce Employee Stock Sale Plan as It Waits On IPO [Confirmed] « /SAbackchan says:

    [...] Rumor: Zynga to Introduce Employee Stock Sale Plan as It Waits On IPO [Confirmed] Rumor: Zynga to Introduce Employee Stock Sale Plan as It Waits On IPO . [...]

  7. With $180 Million in New Funding, Zynga Settles In For a Protracted Social Gaming War says:

    [...] significance of the move, as we covered on Inside Social Games, is that the company is not planning to go public any time soon. With revenue of more than $200 [...]

  8. DST Partner Talks Facebook, Zynga and Future Plans says:

    [...] firm announced it had led Zynga’s $180 million round, earlier this week, including what we’ve heard is $50 million for employee and investor shares. At the same time, it has continued purchasing [...]

  9. Edwin Permana says:

    That 1 billion dollar value is just an estimate of revenue and projected growth by mark pincus

    I think mark plan is to execute the plan to take Zynga to 1 billion dollar revenue first before
    going to IPO

    Given current projection of 2009 200 million revenue with 35%-45% growth yearly, It is within the realm of probablity for Zynga plan to be
    realized with 1Billion dollar in 2 years period.

    I personally think a genius strategist and well executioner style CEO + investor like mark pincus can pull this out excellently

  10. Taking Stock of Facebook’s Top Social Game Developers in 2009 says:

    [...] and around 60 million daily active users — and a big new round of $180 million, including an employee stock sale plan — we can expect the company to be around for a long time to come. At some point, probably as [...]

  11. Interview with Zynga CEO Mark Pincus on Social Gaming in 2010 says:

    [...] earlier this month, the company closed a $180 million round of funding, in part to let employees sell stock. The signs, more than ever, point to an initial public offering, even though the company and our [...]

  12. Tencent Investment in DST Shows International Confluence of Social Games, Social Networks, and Virtual Goods says:

    [...] then put $180 million into Zynga last year, in a scantly detailed investment where early employees were similarly able to sell some stock. Partner Alexander Tamas told us at [...]

  13. 180 Milyon dolar yatırım!! FarmVille « LokumOyun.com says:

    [...] DST’nin yaptığı yatırıma dair The New York Times’ın paylaştığı bilgiye göre, DST ilk olarak şirket çalışanlarının ve önceki yatırımcılarının hisselerinin bir kısmını satın alacak sonra da şirket hisselerini üzerine geçirecek. Şirket çalışanlarının hisselerinin satın alınabileceği söylentileri zaten dün farklı kaynaklara dayandırılarak Inside Social Games sitesinde de konu olmuştu. [...]

  14. Zynga Sets Sail for Japan, the World, With $147M SoftBank Investment says:

    [...] investment adds to an already-bulging war chest for Zynga. Its last round was $180 million from a consortium led by Digital Sky Technologies, late last [...]

  15. Zynga’s Confusing Deal Terms Result in Acquisitions, Padding in Case of Hard Times says:

    [...] a big cash hoard in the last year. Between the $180 million it said it raised in December from aconsortium led by Digital Sky Technologies, and $147 million that it has not confirmed it has raised from SoftBank, the company could have [...]

  16. Out of Zynga’s Confusing Deal Terms Come Big New Fundings says:

    [...] a big cash hoard in the last year. Between the $180 million it said it raised in December from aconsortium led by Digital Sky Technologies, and $147 million that it has not confirmed it has raised from SoftBank, the company could have [...]

  17. Zynga Has a New Investor and Social Gaming Platform Provider: Google says:

    [...] never filed standard regulatory paperwork showing that it has raised the SoftBank money, or the $180 million it announced it was receiving from Digital Sky Technology back in February. Instead, piecemeal [...]

  18. Farmville’in Yapimcisi Zynga, DST’den 180 Milyon Dolar Yatirim Aldi! says:

    [...] DSTnin yaptigi yatirima dair The New York Timesin paylastigi bilgiye gore, DST ilk olarak sirket calisanlarinin ve onceki yatirimcilarinin hisselerinin bir kismini satin alacak sonra da sirket hisselerini uzerine gecirecek. Sirket calisanlarinin hisselerinin satin alinabilecegi soylentileri zaten dun farkli kaynaklara dayandirilarak Inside Social Games sitesinde de konu olmustu. [...]

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