NEW YORK (TheStreet) -- This week, a month after I wrote "Play With Zynga Games, Not Zynga Stock" shares in Zynga (ZNGA) soared after news the online game company had successfully recruited Don Mattrick as its new CEO. After trading in the mid $2.80s, shares are once again above $3, closing Tuesday at $3.27.
But how long will this last?
Active trading is generally bad for investors, but Zynga isn't an average stock. Wall Street views most stocks under $5 as bankruptcy candidates -- and with good reason. The street is littered with the corpses of portfolios that attempted to buy "value" under $5.
I suggest that investors use this week's price spike to take some money off the table. It's not that I think Mattrick isn't an effective leader or that he can't turn the company around. Mattrick led Microsoft's (MSFT) highly successful Xbox division. Clearly he's an outstanding choice and Zynga's shareholders are lucky that he agreed to give up his summer and start almost immediately.The problem shareholders face is bigger than one man. Mattrick needs time to assess leadership and/or install new C-suite members. Finding a way to shift Zynga's foundation from sand to bedrock will also take time. Zynga is connected at the purse to Facebook (FB), and enjoys slightly greater negotiating leverage than our three-year old son has with my wife. Investors with even an elementary understanding of game theory can comprehend Facebook's ability to put Zynga in checkmate within at most two moves whenever it wants. Changes in command are nothing new, and we don't have to guess what the likely outcome is. Fortunately, we have a similar example as a road map: BlackBerry (BBRY) changed chiefs in January 2012, and it turned out that Thorsten Heins was another A-list CEO who took the helm of a tech company circling the drain. I have many, but please read my last BlackBerry article titled "BlackBerry Hits Iceberg in June." News of Heins' taking control moved shares higher at first, but gravity is a bitch and restraining a waterfall is an arduous task for one person. The specific underlying problems of both companies are worlds apart, but the fundamental issues are the same.
Select the service that is right for you!COMPARE ALL SERVICES
- $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
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV