(Bloomberg) -- In a rare move, Zynga Inc. co-founder Mark Pincus is eliminating the super-voting privileges on his stock, reducing his control and potentially making the company more vulnerable to a takeover.
Pincus is taking his overall voting rights at the San Francisco-based maker of social games down to about 10 percent from about 70 percent, the company said in a statement Wednesday. As part of the move, the company is shifting to a single-class share structure from a multi-class one, giving all shareholders equal voting rights.
While a number of large companies, including Facebook Inc. and CBS Corp., have special classes of stock that give relatively few people voting control, shareholder activists have long criticized the practice saying that the voices of smaller investors are not heard. In an interview, Pincus said he made the decision in consultation with the board.
“The company today is in a much better position than in 2015 or 2013,” Pincus said in a telephone interview. “Now we’re like any other normal publicly traded company.”
There was a period of time, Pincus said, when “people could have thought the company was worth more dead than alive.” By holding onto his controlling shares, he prevented any possible takeover. “We all agreed the company is in a good place for me to transition,” he added.
Chief Executive Officer Frank Gibeau, who previously worked at Electronic Arts Inc., has been leading Zynga on a turnaround path since he joined two years ago. Gibeau has sought to focus the company on core games, such as Words With Friends and Zynga Poker, releasing updates and staging competitions that bring existing customers back for more.
Zynga reported first-quarter revenue rose 7 percent to $208.2 million, while earnings swung to a $5.6 million profit from a $9.5 million loss a year earlier. Zynga projected revenue of $208 million and net income of $1 million for the second quarter. The company also announced a $200 million share repurchase program, following the completion of an existing similarly-sized program.
As part of the process of consolidating the share structure, Pincus is shifting his title from chairman to non-executive chairman. He will continue to have a board seat at the company as long as he retains at least half of his current Zynga stake, the company said. When Zynga went public in December of 2011 with three classes of shares, Pincus owned all of the the Class C shares, which held 70 votes per share, and the majority of the Class B shares, which held seven votes. Class A votes hold one vote per share.
Zynga shares have fallen 12 percent this year through Tuesday.
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