Zynga 2012 Annual Report Download - page 101

Stock Repurchases
In October 2012, our Board authorized a $200 million stock repurchase program. We initiated purchases
under this program in December 2012. As of December 31, 2012, we had repurchased $11.8 million of our
Class A common stock under our stock repurchase program and the remaining authorized amount of stock
repurchases that may be made under this plan was $188.2 million. In 2012, we spent a total of $11.8 million to
repurchase 5.0 million shares of our Class A common stock at an average purchase price of $2.36 per share.
Warrants
During 2010, concurrent with the sale of 23.3 million shares of Series B-2 convertible preferred stock, we
granted an investor a contingent right to a warrant to purchase 7.8 million shares of Class B common stock at an
exercise price of $0.005 per share. The amount allocated to the contingent warrant right, based on fair value, of
$4.6 million was recorded to additional paid-in capital on the date the right was granted and accounted for as a
beneficial conversion feature. Because the Series B-2 shares have no stated redemption date, the discount was
immediately charged to retained earnings as a deemed dividend. In April 2011, a distribution agreement was
executed and the investor’s right to receive the warrant was extinguished.
In June 2011, in connection with a service arrangement with a related party, we issued a warrant to purchase
1.0 million shares of our Class B common stock at an exercise price of $0.05 per share to a service provider. The
warrant vests ratably over an eight quarter service term beginning in April 2010 and the warrant expires in April
2012. We determined the fair value of the warrant using the Black-Scholes option-pricing model. We revalued
this warrant each period as services were performed and expensed the portion of the warrant that vested each
period. In 2011, we recorded $14.0 million of expense related to this warrant, which related to services that were
performed from April 2010 through December 31, 2011. In the year ended December 31, 2012, we recognized
$1.7 million of expense related to the warrant. In June 2011, the service provider fully exercised the warrant, and
in April 2012, the warrant fully vested.
Equity Incentive Plans and Stock-Based Expense
In 2007, we adopted the 2007 Equity Incentive Plan (the “2007 Plan”) for the purpose of granting stock
options and ZSUs to employees, directors and non-employees. Concurrent with the effectiveness of our initial
public offering on December 15, 2011, we adopted the 2011 Equity Incentive Plan (the “2011 Plan”), and all
remaining common shares reserved for future grant or issuance under the 2007 Plan were added to the 2011 Plan.
The 2011 Plan was adopted for purposes of granting stock options and ZSUs to employees, directors and non-
employees. The maximum number of shares of our Class A common stock that may be issued under our 2011
Plan is 42.5 million shares and excludes the number of shares still available under our 2007 Plan as of the date of
our initial public offering in addition to any other stock-based awards granted under the 2007 Plan that otherwise
expire or terminate without having been exercised. The number of shares of our Class A common stock reserved
for future issuance under our 2011 Plan will automatically increase on January 1 of each year, beginning on
January 1, 2012, and continuing through and including January 1, 2021, by 4% of the total number of shares of
our capital stock outstanding as of December 31 of the preceding calendar year.
The following table presents the weighted-average assumptions used to estimate the fair values of the stock
options granted in our consolidated financial statements:
Year Ended December 31,
2012 2011 2010
Expected term, in years ........................... 6 6 6
Risk-free interest rates ............................ 0.67% 2.04% 2.70%
Expected volatility ............................... 62% 64% 73%
Dividend yield .................................. — — —
Fair value of common stock ........................ $2.80 $6.44 - 17.09 $6.44
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