Brave or stupid? Zynga’s stock rise today has us scratching our heads

Brave or stupid? Zynga’s stock rise today has us scratching our heads

It’s been a very, very bad day for Zynga. Not only has it been hit with potentially damaging and damning legal action from Electronic Arts (EA), a new, seperate class action lawsuit has been levied against it as well. The only recent day that comes to mind as potentially comparably as bad was its most recent earnings report, which missed, causing its stock to fall around 40% the following day.

Surely the same thing happened today, as EA has filed a lawsuit that could set the precedent for Zynga being successfully litigated for lifting game design ideas and elements from other companies’ titles? And the class action suit is no joke, as it claims that the company was dishonest in discussing its prospects while going public, so that too must have been a hit to its stock?

Oddly, Zynga ended the day up 0.74%. It was up several percent at one point, deflating slightly from its intraday high, but Zynga of today, now under two lawsuits, is worth more than the Zynga of yesterday, which wasn’t. If that doesn’t make much sense to you, welcome to our club.

There are any number of ways of parsing this information, that such terrible news would have little to no impact on Zynga’s stock. We propose and discuss a few below:

Investors are unaware of the lawsuits:

  • The EA suit is all over the new and traditional press, from The Next Web to the Wall Street Journal. Unless they are avoiding it, Zynga investors should be aware of what’s up.

Zynga has already falled so far, surely it can’t decline again:

  • If it can go up, it can can go down. Zynga is still worth several billion dollars (two, to be exact). That is plenty of valuation to burn through.

Investors just don’t care:

  • That makes zero to no sense. They own this company.

Investors left in Zynga believe in its ability to turn around:

  • This idea has legs. Any investor left after its recent collapse, along with any investor that bought in after, must really believe in a Zynga turn around.

Enough people are buying to keep the stock afloat:

  • This one is axiomatically true, so it’s essentially meaningless to discuss.
Investors think that Zynga can win the lawsuits handily:
  • And therefore continue with their business as usual. This would allow any investor to buy into the company now at a massive discount from its previous price levels. This, of course, only works if Zynga wins quickly and doesn’t get stuck in a legal quagmire.

We’re taking open analysis in the comments section of this post. Whoever comes up with the best theory gets an Internet hug from myself.

This sort of question matters as it helps everyone in technology better understand the current mentality of investors – what they are looking for, how they will react, how skittish they are. Technology companies continue to go public, so how currently public firms are treated by the market isn’t idle information.

For now, TNW can’t quite parse why Zynga’s value (which should be reflected in its market valuation) isn’t impacted by two lawsuits that could bleed it of cash, distract its executives and employees, and potentially force it to abandon certain titles, or game development practices.

Top Image Credit: Emmanuel Huybrechts

Read next: 25 Brand new typefaces released last month that you need to know about (August)

Corona coverage

Read our daily coverage on how the tech industry is responding to the coronavirus and subscribe to our weekly newsletter Coronavirus in Context.

For tips and tricks on working remotely, check out our Growth Quarters articles here or follow us on Twitter.