Zynga, whose IPO Friday afternoon sent tech writers with their 4th of July bags packed into a last minute scramble, may be headquarterd out in the Valley. But its impending liquidity event will end up lining the pockets of earlylocal investors like Union Square Ventures, which reportedly owns 5.5 percent. In fact, Silicon Valley Bank’s Shai Goldman called it a “fund maker” for USV. But now that the fireworks have died down, Fortune.com’s Dan Primack has taken a closer look at Zynga’s S-1, comparing it to earlier regulatory filings, and found some discrepancies in the sequence of investing.
According to the S-1, in February 2008, USV, along with Avalon Ventures and Foundry Group, did a combined Series A-1 investment of nearly $5 million. Notes Mr. Primack:
Except that it couldn’t have happened that way.
Take a look at this regulatory filing, back from when Zynga was still known as Presidio Media. It is dated December 31, 2007, and signed by company founder and CEO Mark Pincus. At that time, Zynga listed Avalon Ventures, Foundry Group and Union Square Ventures as shareholders (i.e., two months before the S-1 suggests they first invested). Moreover, there is no mention of Series A-1 stock. Just Series A.
Mr. Primack also points to a blog post by USV’s Fred Wilson from January 15, 2008 where Mr. Wilson announces USV’s investment in Zynga and writes:
The financing that we provided Zynga, along with our friends Foundry Group, Avalon, Reid Hoffman, Peter Thiel, and several angels, has already allowed Zynga to double the size of its engineering team and to integrate several other social games and social game developers into their network.
In examining the classes of shares, Mr. Primack also notes other inconsistencies, including a chart in Zynga’s S-1 showing repurchased shares by insiders that shows “USV and Foundry sold ‘Series A’ shares, while Avalon sold ‘Series A-1 shares.'” Neither Zynga nor USV would offer comment and it’s possible there is some kind of accounting or legal explanation for it. But let’s hope this all gets cleared up pre-IPO. After all, the public market has already been rocky for some tech stocks without any mysteries embedded in their filings.