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Zynga Elaborates on Its IPO Risks After Schmidt Praises CEO

Zynga Inc. updated its initial public offering filing to expand on the risks of losing its chief executive officer after Google Inc. Chairman Eric Schmidt called him a “a fearsome, strong negotiator.”

In a Bloomberg News story on Dec. 12, Schmidt praised the ability of Zynga CEO Mark Pincus to forge deals, saying “he is a we’re-going-to-make-this-happen-or-else type of person.” Google is an investor in Zynga, and the remarks prompted the company to elaborate on an existing passage in its filing on the value of Pincus to the online-games startup.

“Pincus is critical to our vision, strategic direction, culture, products and technology,” Zynga said in today’s updated prospectus statement, echoing previous filings. “The loss of our founder and chief executive officer, even temporarily, or any other member of senior management would harm our business.”

Zynga, the largest developer of games for Facebook Inc.’s sites, made the disclosure while preparing to price its IPO later today. The San Francisco-based company plans to offer as much as $1 billion of stock, selling 100 million shares for $8.50 to $10 apiece. That would be the biggest IPO for an Internet company since Google’s debut in 2004.

In the Bloomberg story, Schmidt described a negotiation between Zynga and Google where Pincus “knew more about the proposed deal than everyone on the Google side of the table combined.” The talks led Google to buy a 3 percent stake in Zynga, the largest developer of social-networking games. Google plans to sell 1.69 million shares in the offering, reducing its voting interest to 2.8 percent.

“The statements regarding Mr. Pincus should not be taken in isolation, but should be read together with the risks and uncertainties described in this prospectus,” Zynga said today in the filing. “You should make your investment decision only after reading this entire prospectus carefully.”

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