Wall Street is keeping an eye on Zynga’s wallet.
The social-gaming company’s market value is equal to its cash on hand, which means investors think the rest of the business, including games like “FarmVille” and “Words With Friends,” is worth almost nothing.
Zynga’s shares rose slightly yesterday to close at $2.44, giving it a market cap of $1.85 billion. That’s virtually the same as its $1.8 billion in cash and cash equivalents.
Fearing Zynga’s continuing losses will erode its cash pile, some on Wall Street don’t think the shares should be trading that high.
“They have hard assets, which could justify current value, but how much credit do you want to give for those cash assets?” said analyst Ken Sena with Evercore Partners.
“If the business isn’t profitable next year, how much cash stands to be burned?”
Last week, Zynga shocked the Street when it said it would post a loss in the third quarter and cut its outlook for the rest of the full year, sending the shares down a steep 20 percent.
Zynga said revenue would be as much as $305 million but that its losses would also top $100 million.
It also said it would write down by $95 million its acquisition of OMGpop, only six months buying the startup behind hit game “Draw Something.”
Not only are investors panicking, but employees are jumping ship and insiders are disgruntled over mismanagement, according to sources close to the company.
The head of online gambling titles like Zynga Poker, Laurence Toney was the latest in a string of high-profile departures.
Investors were hoping Zynga would transform into a real-money gambling site, unleashing a pot of new revenue, but Toney leaving cast new doubts on that strategy, Sena said.