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TPG-Axon Ups Its Position in Zynga by 36%

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TPG-Axon’s holdings in Zynga

TPG-Axon Capital Management enhanced its position in Zynga Inc. (ZNGA) by increasing the number of shares held in the company from 16,303,598 in 3Q14 to 22,124,546 in 4Q14. This represents an increase of 36%.

Zynga forms 4.42% of the fund’s 4Q14 portfolio. The stock is also part of the Vanguard Small-Cap ETF (VB) and the iShares North American Tech-Software (IGV) with exposures of 0.07% and 0.39%, respectively.

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Chief executive officer Don Mattrick to quit

According to an April 8, 2015, company press release, Zynga’s CEO (chief executive officer) Don Mattrick will be leaving the company. Mark Pincus, chairman and founder of Zynga, will return to serve as the company’s CEO.

Zynga launches new titles in 2015

In a company earnings release dated February 12, 2015, Zynga said it will be entering the action strategy genre with the launch of Empire & Allies and Dawn of Titans, a new game from NaturalMotion, an acquisition made by Zynga earlier in 2014.

In the Match 3 genre, the company will be launching the Farmville: Harvest Swap title. According to a February 13, 2015, research report by Sean McGowan of Needham & Company, these genres are highly popular in the industry and have great monetization capability. Zynga’s exhaustive user base should offer the company a major edge in terms of marketing.

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4Q14 financial highlights

Zynga reported revenue of $193 million for 4Q14, a 9% increase over 4Q13 as well as 3Q14. Online game revenue declined 11% over the prior year to $135 million. But there was a significant increase in advertising revenue, which grew 139% over the prior year period to $58 million.

Advertising’s share of revenues rose to 30% in 4Q14, representing the highest value for any quarter for the time-frame beginning in 4Q13. Bookings increased 24% to $182 million in 4Q14 compared to 4Q13. Net loss was $45 million for 4Q14 compared to $25 million in 4Q13. Diluted net loss per share amounted to $0.05 for 4Q14 compared to $0.03 during 4Q13.

Zynga trades at a PB (price-to-book) value of 1.2x. Electronic Arts, Inc. (EA) has a value of 6.6x, and Activision Blizzard, Inc. (ATVI) trades at a PB value of 2.3x. Kings Digital Entertainment plc (KING) trades at 5.7x.

About Zynga

Zynga offers social game services. The company is involved in the development, marketing, and operation of social games in the form of live services. Users play the games primarily on Android and iOS mobile platforms and on social-networking websites such as Facebook. The company’s games are generally free. Zynga generates its revenues through advertising and virtual goods sales within the games it provides.

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