Zynga Gains After Nevada Clears Online GamblingDouglas MacMillan and Karl Baker
Zynga Inc., the biggest maker of online social games, climbed 7.5 percent on optimism that other U.S. states may follow Nevada in legalizing real-money gambling over the Internet.
The shares rose to $3.43 at the close in New York, after Zynga announced plans to eliminate 1 percent of its workforce. The stock has climbed 45 percent this year, compared with a 4.5 percent increase for the Russell 1000 Index.
Nevada legalized online gambling last week, creating a possible new revenue opportunity for Zynga, which has struggled to step up growth as gamers have shifted to mobile devices. Last year the company signed a partnership with Gibraltar-based Bwin.Party Digital Entertainment Plc to offer real-money gambling in the U.K.
“As states legalize some form of online gaming, you’re likely going to see Zynga positively impacted,” Edward Williams, an analyst at BMO Capital Markets, said in an interview. Revenue from Web-based betting will probably measure “in the billions,” he said.
The San Francisco-based company filed for a preliminary finding of suitability for gaming in Nevada, Chief Revenue Officer Barry Cottle said in December. It could take the game maker 12 to 18 months to become eligible for real-money wagering in the state, he said at the time. Dani Dudeck, a Zynga spokeswoman, declined to provide an update on the timing today.
Zynga is consolidating office locations in New York and closing one site in Baltimore and two in Texas, Chief Operations Officer David Ko said today in an e-mailed statement. Workers in McKinney, Texas, will shift to a site in Dallas and employees at one Austin location will move to another site in the same metropolitan area, he said.
Currently, Zynga generates revenue by selling virtual goods within its games -- for example, a gun in “Mafia Wars” or a brick oven in “ChefVille.” Zynga’s titles are among the most popular games played on Facebook Inc.’s social network.
Zynga sold 100 million shares at $10 apiece, the top of a proposed range, in an initial public offering in December 2011.