SAC Capital (Point 72 Asset Management) doubled their stake in Zynga (ZNGA) to 5% over the last few months. With Zynga selling at 70% off of its value from just two years ago….is it time for us to load up as well?
Probably NOT.
Listen, I would be the first one to tell you that I am not smart enough to figure out Zynga’s business model. Not in terms of their revenue generating capability, but in terms of creating “popular games”. This is more or less similar to a movie business model where the hits can be anticipated, but not fully predicted.
While the stock has been trending higher over the last few months, it did leave a large gap at around $3.50 that it must close before any meaningful gains can take place. Further, with our mathematical and timing works showing a bear market between 2014-2017, there will be very little chance for this highly speculative stock to move higher. As such, I would definitely stay away from Zynga until and unless it breaks out above $6.
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SAC Capital Doubles It’s Zynga Stake….Time To Buy? Google
Bloomberg Writes: Troubled SAC Capital Doubles Its Stake in Troubled Zynga
Maybe it’s investment as performance art? Hedge fund titan Steven Cohen, head of insider trading hotbed SAC Capital, has increased his stake in troubled game makerZynga (ZNGA) to more than 5 percent, according to a company filing, more than double the 2.2 percent he held at the end of 2013.
Zynga makes FarmVille, Words With Friends, Draw Something, and other social games. The company has had a rough time since going public at the end of 2011, including multiple rounds of layoffs, ill-considered acquisitions, and a soured relationship with Facebook (FB). Hedge funds own almost 58 percent of Zynga shares, according to Bloomberg data, up from 27 percent one year ago.
While Cohen is famous for buying and selling stocks rapidly, SAC Capital does have some large and seemingly miscellaneous holdings, including 8.8 percent ofClearwater Paper (CLW), 4.87 percent of Trulia (TRLA), and 4.71 percent of Crocs(CROX).
At $4.49, shares of Zynga have lost 69.7 percent since their high on March 2, 2012. This year the shares have gained 16.8 percent, owing largely to a $527 millionpurchase of mobile game developer NaturalMotion in January, which the company announced alongside a new round of layoffs. More analysts rate Zynga a sell than a buy, according to Bloomberg data.
Cohen’s hedge fund asked a federal judge on Thursday to approve its $1.8 billion insider trading settlement with the government, saying it was “deeply remorseful”for a sustained pattern of illegal activity by its employees. Six former employees have pleaded guilty to insider trading; two more, Michael Steinberg and Mathew Martoma, were found guilty at trial in recent months. As part of its deal with the government, SAC has agreed to stop managing outside investors’ money.
SAC, which is changing its name to Point72 Asset Management, will continue as a “family office” managing Cohen’s personal fortune. Cohen is worth $8.7 billion, and has amassed one of the world’s better collections of contemporary art, including a dead shark in a tank of formaldehyde, a human head sculpted out ofthe artist’s own frozen blood, and some paintings. Valued at $173 million, the Zynga stake is not much more than the $155 million Cohen paid one year ago for Le Rêve, a 1932 oil painting by Pablo Picasso.
What do you guys think?