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Maybe I'm misunderstanding what you're saying, but if you say their future involves burning through their cash-on-hand just to keep the lights on, why is the st

Maybe I'm misunderstanding what you're saying, but if you say their future involves burning through their cash-on-hand just to keep the lights on, why is the stock worth anything to you?

humbleMouse 11y ago
My point is that I think it's a good bet that they make at least one more game that people like at some point in the future. If they spent 50 million dollars a year running their business they will be around for another 20 years, and in that time span the chances are good they will make another decent game. Then when their stock jumps I will sell it for a healthy cash out. Another scenario is that they get acquired by a different company. In this scenario it is also likely their share price would jump and I would cash out as well.
- Maro 11y ago
  According to wikipedia they have ~2,000 employees, that's like ~$200M just for payroll, overall costs are probably around ~$3-400M. (I didn't look up other numbers, I just gut estimated.)
  - humbleMouse 11y ago
    Interesting point Marco, and also begs the question of why the hell you need 2,000 employees to run a game company. Hopefully somebody gets put in charge who will thin the herd.
    - goldbrick 11y ago
      It's fascinating to see on HN (where people should know better) how many companies people go "how can they possibly need that many people" and even better "i know what will make them successful -- laying off a bunch of people!"
      - humbleMouse 11y ago
        So are you going to address the question of why Zynga needs to employ 2000 people to run a game company or not? I am actually asking and would be grateful if you could enlighten me.
        hluska 11y ago
        I'm not answering your question, just adding another point of data. But, at one point, they had more than 3400!!
        goldbrick 11y ago
        It's the same reason you need trillions of cells to leave your insipid comments on the internet.
      - hluska 11y ago
        In Zynga's case, their market cap is actually less than the value they attach to their assets. This is particularly interesting because of these two numbers from their 2015 balance sheet: - Goodwill - 657,671,000 - Property, plant and equipment - 273,221,000 The 273 million in PP&E is interesting because that is essentially the purchase price on their headquarters building (or $340 per square foot). Office space in San Francisco is going for around $800 per square foot now. Since investors know about that potential large gain, they are effectively saying two things: 1.) They do not trust that Zynga will ever deliver profits. 2.) They value goodwill at zero. In a case like this, honestly, laying off people is one of the more palatable tools in their box. A round of layoffs would: a.) Drop their annual operating loss (they lost about $45m in 2015 and if their headcount stays the same and they lease space in the building they currently own, they can expect that loss to rise in 2016.) b.) Cut the amount of space that they need to lease. c.) Streamline the company. Of course, it could also: a.) Kill morale. b.) Encourage everyone left to dust off their resumes and stream for the exits while the job market in San Francisco stays strong. Either way, Zynga is in a tough spot. Investors have ultimately valued the company at assets + zero and show little faith that the company will ever be profitable again. Layoffs are a tough thing and they often backfire, but strategically, they aren't unthinkable.
- hluska 11y ago
  Good analysis! According to their most recent statement of cash flows (year ended Dec 31, 2015), they lost about $45m on operations last year. Since they're selling their building (and if there are no layoffs), I suspect that to increase to around $55m. That gives them a ton of runway... My only concern is that their current $2.25 stock price gives them a market cap of a little less than $2.1b. That is quite interesting because their 2015 balance sheet shows total assets of just a little over $2.1b. The dubious number on their balance sheet is ~ $658m of goodwill, but I think that risk is possibly offset by only valuing their property, plant and equipment at ~ $273m. Zynga may not have another hit left in them, but if they do, a $2.25 stock price leaves plenty of room for profit. It's definitely not a place to park your retirement money, but there are certainly worse stocks out there!
edvinbesic 11y ago
I'm assuming he means that they have enough money to keep going until they come up with the next cash cow at which point the stock will skyrocket again like a yoyo. Wether or not that's a good bet is debatable considering their track record to date.
erikpukinskis 11y ago
The same reason a YCombinator company is worth anything. Nonzero probability of them doing something really valuable while the lights are on.

Maybe I'm misunderstanding what you're saying, but if you say their future involves burning through their cash-on-hand just to keep the lights on, why is the stock worth anything to you?

humbleMouse 11y ago

My point is that I think it's a good bet that they make at least one more game that people like at some point in the future. If they spent 50 million dollars a year running their business they will be around for another 20 years, and in that time span the chances are good they will make another decent game. Then when their stock jumps I will sell it for a healthy cash out. Another scenario is that they get acquired by a different company. In this scenario it is also likely their share price would jump and I would cash out as well.

Maro 11y ago
According to wikipedia they have ~2,000 employees, that's like ~$200M just for payroll, overall costs are probably around ~$3-400M. (I didn't look up other numbers, I just gut estimated.)
- humbleMouse 11y ago
  Interesting point Marco, and also begs the question of why the hell you need 2,000 employees to run a game company. Hopefully somebody gets put in charge who will thin the herd.
  - goldbrick 11y ago
    It's fascinating to see on HN (where people should know better) how many companies people go "how can they possibly need that many people" and even better "i know what will make them successful -- laying off a bunch of people!"
    - humbleMouse 11y ago
      So are you going to address the question of why Zynga needs to employ 2000 people to run a game company or not? I am actually asking and would be grateful if you could enlighten me.
      - hluska 11y ago
        I'm not answering your question, just adding another point of data. But, at one point, they had more than 3400!!
      - goldbrick 11y ago
        It's the same reason you need trillions of cells to leave your insipid comments on the internet.
    - hluska 11y ago
      In Zynga's case, their market cap is actually less than the value they attach to their assets. This is particularly interesting because of these two numbers from their 2015 balance sheet: - Goodwill - 657,671,000 - Property, plant and equipment - 273,221,000 The 273 million in PP&E is interesting because that is essentially the purchase price on their headquarters building (or $340 per square foot). Office space in San Francisco is going for around $800 per square foot now. Since investors know about that potential large gain, they are effectively saying two things: 1.) They do not trust that Zynga will ever deliver profits. 2.) They value goodwill at zero. In a case like this, honestly, laying off people is one of the more palatable tools in their box. A round of layoffs would: a.) Drop their annual operating loss (they lost about $45m in 2015 and if their headcount stays the same and they lease space in the building they currently own, they can expect that loss to rise in 2016.) b.) Cut the amount of space that they need to lease. c.) Streamline the company. Of course, it could also: a.) Kill morale. b.) Encourage everyone left to dust off their resumes and stream for the exits while the job market in San Francisco stays strong. Either way, Zynga is in a tough spot. Investors have ultimately valued the company at assets + zero and show little faith that the company will ever be profitable again. Layoffs are a tough thing and they often backfire, but strategically, they aren't unthinkable.
hluska 11y ago
Good analysis! According to their most recent statement of cash flows (year ended Dec 31, 2015), they lost about $45m on operations last year. Since they're selling their building (and if there are no layoffs), I suspect that to increase to around $55m. That gives them a ton of runway... My only concern is that their current $2.25 stock price gives them a market cap of a little less than $2.1b. That is quite interesting because their 2015 balance sheet shows total assets of just a little over $2.1b. The dubious number on their balance sheet is ~ $658m of goodwill, but I think that risk is possibly offset by only valuing their property, plant and equipment at ~ $273m. Zynga may not have another hit left in them, but if they do, a $2.25 stock price leaves plenty of room for profit. It's definitely not a place to park your retirement money, but there are certainly worse stocks out there!

edvinbesic 11y ago

I'm assuming he means that they have enough money to keep going until they come up with the next cash cow at which point the stock will skyrocket again like a yoyo. Wether or not that's a good bet is debatable considering their track record to date.

erikpukinskis 11y ago

The same reason a YCombinator company is worth anything. Nonzero probability of them doing something really valuable while the lights are on.