Zynga Inc., the mutli billion dollar company whose claim to fame includes farmville and mafia wars, is gearing up to go public. The company is valued approximately at $20 billion and is planning to have its shares trading before Thanksgiving.
A situation that Zynga is trying to avoid is the “Google chef” situation, where a member of the kitchen staff became worth $20 million after Google’s IPO in 2004.
What is the remedy that Zynga has implemented? It is actually quite practical. A little background of how Zynga recruited talent, they would attract programmers with promises of ownership in a company that would hopefully be highly valued in the future (which is how most tech start ups operate).
However, unlike conventional ownership, their method of issuing shares involved vesting (which is a form of giving ownership to an individual but still maintain the right to revoke ownership for a certain period of time). This allowed Zynga to claim shares back from what Mr. Pincus, chief executive, calls “MIA executives”. Zynga is only revoking shares from people who no longer carry their weight within the company and this policy is only affecting a minority of the company’s staff.
Zynga going public is amongst many other IPOs recently in this field, such as Groupon and many more will be joining them. This makes me a little weary, we have seen this all before with the Dot Com bubble and housing collapse in the recent years. I am not by any means ringing the doomsday bell, but I know that personally I will be keeping an eye out and try not to get caught up in tech IPO investment fever.