Pincus relinquishes control over Zynga

Zynga founder Mark Pincus on Wednesday relinquished control over the video game company in an unusual move made because, he says, he’s confident the current executive team is successfully reviving the long-struggling San Francisco firm.

Pincus converted two types of Zynga stock he owned into common shares, shrinking his control over the company’s voting stock from 70 percent to less than 10 percent. Pincus isn’t selling any of his stake in the company, but he no longer is an official employee. He remains on the board as the non-executive chairman.

The changes were revealed as Zynga released its firstquarter earnings report, which said the company’s net income grew to $5.6 million, compared

to a $9.7 million net loss a year ago.

Revenues grew to $208.2 million, up 7 percent from last year, with growth coming from more players for Zynga’s franchise games “CSR2,” “Words With Friends” and “Zynga Poker.”

Pincus has twice stepped in and out of the top management positions of the company he founded in 2007. In an interview with The Chronicle, Pincus said the company’s performance since CEO Frank Gibeau took over convinced him “now this is the right time” to leave again.

Pincus also wanted to chase other ventures, including one he would only say was related to blockchain technology.

“It’s time to change my role, go back to entrepreneurial interests, making lots of investments,” Pincus said. “I wanted to go pursue the stuff that some might say what I’m doing is a little crazy, but I didn’t want it to be a distraction that comes back to Frank and the team.”

In a post on Medium, Pincus said he will “continue to partner with Frank on strategy,” citing the example of games for Facebook Messenger.

Gibeau, who is a board member, said Pincus came to the board with the idea of simplifying the company’s stock structure, and said he was not pressured by the board or investors. Both he and Pincus said the changes were not being made to pave the way for a sale of the company.

“It’s really a great transition, and we’re very supportive and very excited,” Gibeau told The Chronicle.

“This is not a precursor to selling shares and not a necessity, either,” Pincus said.

Pincus is going against a trend of founders of Silicon Valley firms, notably Facebook CEO Mark Zuckerberg, maintaining control after going public by retaining a majority share of voting stock.

While Zynga “is executing well” now, Pincus can no longer block a sale by himself, said Michael Pachter, Wedbush Securities managing director of equity research.

Zynga rode Facebook’s rise to social networking dominance with social games like “FarmVille” and “CityVille.” After Zynga went public in 2011, it had as many as 300 million monthly players, but Zynga was hurt by changes in Facebook’s news feed as well as player fatigue.

In 2013, Pincus relinquished the CEO title to make way for Don Mattrick, a former Electronic Arts and Microsoft executive who was brought in to shift the company to mobile games. When Zynga’s fortunes didn’t improve, Mattrick was ousted in April 2015 and Pincus took back the CEO spot.

Pincus stepped down again in March 2016 when he brought in Gibeau, another former EA executive.

“This had moved from a transition to a reinvention to a turnaround,” Pincus said.

Forbes estimates Pincus’ net worth at $1.49 billion.