Zynga proposes "unprecedented" stock structure for IPO
CEO Mark Pincus to get 70 times more voting power than IPO investors
Zynga is altering its stock structure to give CEO Mark Pincus 70 times more voting power than anyone buying shares in the company's planned IPO.
According to documents obtained by Bloomberg, the Zynga board approved a three-tier stock structure that increases Pincus' votes per share from 10 to 70.
Current stockholders will get 7 votes per share, with public investors entitled to a single vote.
Lisa Buyer, a principal at the IPO advisory firm Class V Group, told Bloomberg that, "Zynga has invented something new," calling the three-tier structure "unprecedented" for a technology company.
Buyer advised on Google's IPO, which gave buyers a tenth of the voting power of founders Larry Page and Sergey Brin - the same balance found in two other major tech IPOs this year, LinkedIn Corp. and Zillow Inc.
"Maybe there are so many early employees that even 10-to-1 would put the ultimate decision power in the hands of too large a group of employees or investors," Buyer added.
However, despite volatile market conditions that caused the retraction of a number of planned IPOs, Nitsan Hargil, research director at GreenCrest Capital Management, told Bloomberg that the stock structure won't scare away investors.
"Zynga is holding the trump card here in that they do not need the IPO," he said. "This is the kind of company that the market needs more than it needs the market."
Zynga's current shareholders have been asked to agree to the proposal by September 2. It will take effect in conjunction with the IPO.
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