Remains to be seen whether the IPO will happen this year, but pretty good analysis from PrivCo.com about why it may not..<p>In July 2011 Zynga filed for an IPO.<p>In mid-August Zynga adopted a new 3-tier stock structure, resulting in 3 classes of stock. The new stock structure contains super-voting rights solely for Marc Pincus and to a lesser extent to pre-IPO investors (mainly the venture capital firms). Zynga's new 3-class voting structure is as follows:<p>- For Marc Pincus: 70 voting rights for each share owned<p>- For pre-IPO investors: 10 voting rights for each share owned<p>- For public shareholders (investors in the IPO): Just 1 voting right for each share owned<p>Shortly thereafter, the SEC questioned Zynga's reference in its filings to the term "bookings" under which an unknown portion of Zynga sales are deferred to future periods, ostensibly to signal future growth. (While the term "bookings" is used by manufacturers to indicate orders for future delivery, it is not known how this term would apply in the context of sales of virtual goods to gamers.)<p>In late August, Zynga's IPO began meeting significant investor resistance. PrivCo.com research on Zynga's pending IPO filing concludes:
1. That Zynga's IPO delay is more than a routine "adverse market conditions" delay. Zynga's IPO delays are due to company-specific issues.<p>2. Total number of Zynga's users purchasing goods are currently down year over year (as Zynga is almost entire dependent upon Facebook usage for its revenues, and Facebook usage has also dropped, this was foreeable). As tech IPO investors typically demand a rapid growth story, prospective investors are likely to hold off on investment commitments before seeing further financial metrics indicating renewed momentum.<p>3. Zynga founder Marc Pincus is attempting to direct an unusually large portion of the IPO proceeds to cashing out his stock rather than into Zynga, a negative signal for potential IPO investors. In addition, Pincus seeks to retain control despite selling a large portion of his stock in any IPO, which would make him a minority shareholder. As a result, Pincus has recently converted his Zynga stock into an unusual 70-to-1 separate voting class (i.e., each 1 share of his Zynga stock Pincus retains gives him 70 voting rights, leaving public shareholders with little to no say in the company's decisions post-IPO).<p>4. Prospective IPO investors were stunned when Zynga filed its IPO amendment finally reluctantly disclosing its contract extension with Facebook, and the terms Zynga had to agree to in order to obtain the extension. Zynga's contract extension imposes onerous and one-sided terms on Zynga in favor of Facebook with respect to platform exclusivity, ownership of Zynga game trademarks, and other adverse terms. Zynga's disclosure came in a later amendment to its S-1, only after prospective IPO investors balked at investing without knowing Facebook the contract terms; upon release it became apparent why Zynga omitted the Facebook contract from its IPO filing, despite its materiality, eroding potential investors' confidence.<p>5. In mid-August Zynga's General Manager Jeremy Verba left Zynga (and therefore most of his stock and stock options) to become the CEO of privately held eHarmony, effectively giving up on Zynga's IPO prospects and betting that eHarmony is more likely to go public than Zynga.<p>6. Also in mid-August Zynga arranged for a bank line of credit, of up to $1 billion (with the amount dependent upon Zynga's achieving financial targets), indicative that its bankers are advising a Plan B to an IPO to fund Zynga's ongoing expenses.