Zynga Drops After Abandoning U.S. Online-Betting Plan
Zynga Inc. (ZNGA), maker of the social-networking game “FarmVille,” plunged as much as 20 percent in early trading after abandoning plans to enter the online-gambling business in the U.S.
“While the company continues to evaluate its real-money gaming products in the U.K. test, Zynga is making a focused choice not to pursue a license for real-money gaming in the U.S.,” the San Francisco-based company said yesterday in a statement. The stock tumbled as low as $2.81.
The shares had surged 48 percent this year through yesterday on optimism that Zynga could use Web betting to revive growth amid a slump in gaming on Facebook Inc.’s (FB) network. Zynga took preliminary steps to get a gambling license in Nevada last year, working to enter a U.S. market for online betting that may reach $7.4 billion a year by 2017, according to Manchester, U.K.-based researcher H2 Gambling Capital.
“Zynga probably realized they’re not going to get one,” said Michael Pachter, an analyst at Wedbush Securities Inc. in Los Angeles. “There’s a greater sense of urgency on turning the business around.”
The company also forecast third-quarter sales and earnings that fell short of analysts’ estimates as fewer users access its titles on Facebook’s website.
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