Following Fund Managers

This afternoon we’re being treated to the halt of Zynga Inc as the company has just announced another massive loss along with mass layoffs that can only be described as doing their employees a favor.

I find it hard to believe that a Facebook-based video game company, whose braindead customers spend real dollars to buy virtual bullshit in between cashing unemployment checks, is struggling in an economy as vibrant as this one. I would have assumed that everyone just had money to piss around – especially the 15%-unemployed non-college educated and the 46 million Americans on food stamps. It’s shocking that these people aren’t spending more on digital cabbage, who could have seen this coming?

Anyway, while you’re awaiting the stock to resume trading, presumably lower but who the fuck knows these days, let’s try to take something worthwhile away from the incident.

Last week we were treated to breathless reports about the giant hedge fund that had waded into shares of both Zynga and Groupon last quarter. According to the latest 13F filings, JANA Partners – a $4 billion hedge fund based in New York City – had accumulated 24.6 million shares of the blue chip social gaming stock, presumably at prices between 3 and 4 per share where’s it’s been trading. This amounts to a total position of 90 million bucks or so – roughly 2% of the fund’s total AUM, assuming they’re still long the name headed into today’s halt.

JANA, its manager and its LPs, probably mostly institutions, will be just fine, regardless of what the stock does. It could go to zero and they wouldn’t really be affected.

The same cannot be said for you if you blindly followed them into what can only be described as a broken Muppet-bait IPO from the pre-Facebook days of disbelief suspension and imaginary valuations.

People thought that because JANA was an activist fund that it had some kind of imaginary ability to make this thing an actual business, a productive enterprise and not just a $10 billion liquidity event for the VCs who were smart enough to back it. It doesn’t work that way, the best activists on earth can’t turn a Khloe into a Kim.


David Einhorn of Greenlight Capital has made it a point to begin all of his recent conference presentations with a warning about buying or selling everything he mentions. With good reason.

He knows that people don’t know better and assume a hedge fund is infallible when speculating.


My daily linkfest for financial advisors is now live at Investment News.

Good night.


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