Zynga Underwriter J.P. Morgan Reduces Stake to Almost Zero
One of the major underwriters in Zynga’s public offering has reduced its stake to nearly zero, according to a document filed with the SEC today.
J.P. Morgan now owns 2.6 million shares, or less than half of a percent of the social games company. Based on today’s stock price of $2.59 a share, the shares are worth only $7 million.
A big reduction by an institutional investor, like J.P. Morgan, implies that it doesn’t have a lot of confidence that the company can turn things around in the coming months.
The last time J.P. Morgan updated its stake was a year ago. In January 2012, J.P. Morgan said it owned 6.7 million shares, which equated to a 6.7 percent stake. Back then, shares were trading at $9.12, so the stake was worth a whole lot more, roughly $61 million.
It’s not clear exactly when J.P. Morgan sold its share or at what price. Typically, institutions update their records when their holdings drop below 5 percent.
J.P. Morgan’s relationship with Zynga began during its public offering, with the bank serving as an underwriter. As part of the deal, the bank agreed to buy an undisclosed number of shares associated with the IPO.
Since then, the bank’s research department has flip-flopped about the company’s prospects.
In March, three months after the IPO, J.P. Morgan’s analyst downgraded Zynga to “neutral” from “overweight,” which sent shares sliding by 6 percent. A month later, J.P. Morgan reversed its upgrade and returned the stock’s rating to “overweight.”
It was optimistic about the company’s acquisition of Draw Something and Zynga’s management team’s decision to raise full-year guidance based on the performance of the acquired mobile game.
Of course, Zynga’s troubles started shortly after, with the company having to revise its guidance downward more than once. Not only did its Draw Something game fail to meet management’s expectations, but its revenue on Facebook also dropped.
Zynga’s stock jumped 4.4 percent today to $2.59 a share. The 11 cent spike was tied to the news that Zynga’s patent portfolio has increased as it begins investing more heavily in online gambling.