NEW YORK (TheStreet) -- Those bullish on Zynga's impending IPO can point to the company's explosive growth and ties to Facebook.
But those with doubts about the social gaming company typically list founder Mark Pincus as its biggest threat.
|Zynga CEO Mark Pincus|
While Zynga's reportedly stressful and overly intense company culture led by Pincus has boosted the FarmVille maker to a jaw dropping $10 billion valuation in only five years, it may have also created a brain drain once top developers can cash out and leave after the IPO.
"Some Zynga employees already started to contact me months ago," said Amish Shah, the founder of recruiting firm Millennium Search. "[A brain drain] doesn't need to happen with startups...it didn't happen with LinkedIn (LNKD) or with Salesforce (CRM) back in the day. I haven't heard about a problem like this in a while."Intensifying this concern for Zynga is a recent Wall Street Journal report alleging Pincus was threatening to fire several early employees unless they returned their unvested stock options. Stock options are often doled out by start-ups in lieu of cash as a way of attracting promising engineers and developers. Zynga may now have more difficulty attracting top talent who are likely to question the company's willingness to properly compensate its employees. "If Zynga bypasses giving employees options it's not only negative in the public eye, but it will be a concern attracting new employees," Shah said. "The press and the buzz are all negative--it's the first thing people will hear." Zynga's poor reputation may poise a particular challenge for the company as a war for the best engineering talent wages on across Silicon Valley. "I don't know how someone would want to work at Zynga with Google (GOOG) and Facebook throwing money at developers," said Sam Hamadeh, CEO of Privco, a firm that tracks data from privately held companies. Zynga's culture may also hamper its ability to broker deals with smaller gaming start-ups. The company has relied heavily on acquisitions for growth over the past two years, spending more than $140 million over the last seven quarters, according to regulatory filings.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV