Checking the latest quotes, Zynga is now off 43% since announcing a major profit downgrade after trading closed on Wednesday last week (US time). Further than that, it is down over 80% from its high of $14.69 in March this year.
The stock floated on December 16th at $11.00 and fell to $9.00 by the close of trading, but then enjoyed a slow but steady rise to its peak in March, followed by an equally slow but steady downward drift ever since.
But what caused this recent and savage earnings downgrade?
There is a rumour doing the rounds that Facebook had a hand in this - with the intention of getting the price low enough. Currently Zynga has a market capitalisation of a shade under $2.2B, down from a peak of nearly $11.2B.
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But with its primary, nay almost only, home shuttered and locked, of course the value of Zynga will drop.
Most observers (here for instance) suggest that the price hasn't dropped enough yet, but with a reported $1.6B in cash, it's unlikely that the price will go much lower than its current level.
Analyst Mike Stallings observes, "Once in control of the company, they [Facebook] could then decide to vault all of the Zynga products to the front of the line. Forget the old theory, they could decide internally that the old way was suddenly the best for them. They would happily admit their mistake, and then business as usual. Zynga does have 7 of the top 10 games on Facebook, but the popularity just isn't what it used to be. For example, Farmville had 80 million users this past March, and only 20 million this month!"
Stallings continues, "Whether or not Facebook deliberately drilled a torpedo into Zynga's future is of course up for debate, and something we will probably never know. I have no inside knowledge of such a thing actually occurring. Is it possible? Of course. Probable? Up for debate."
