May 15, 2013 / 3:40 PM / 6 years ago

JANA Partners reveals stakes in Zynga, Groupon

BOSTON (Reuters) - JANA Partners, a leading activist hedge fund firm run by Barry Rosenstein, has taken a liking to two of the most beaten-up technology stocks.

Player avatars from Zynga's FarmVille 2 are seen on a stairway at the entrance to Zynga headquarters in San Francisco, California April 23, 2013. REUTERS/Robert Galbraith

JANA, which oversees more than $4 billion in U.S. stock holdings, disclosed stakes of 24.6 million Zynga Inc class A shares and 21.9 million Groupon Inc class A shares in regulatory filings on Wednesday.

The positions represent just over 3 percent of the companies’ outstanding shares. The Groupon stake was worth $134 million as of the end of March, while the Zynga holding was valued at $86 million, according to the filings.

Zynga shares rose 1.6 percent to $3.39 in afternoon trading, after gaining more than 7 percent earlier in the day. Groupon edged up 1.2 percent to $6.97, after achieving a nine-month high of $7.38 earlier on Wednesday.

Groupon, the world’s largest daily deal company, and Zynga, a leading social game developer, went public in 2011 at lofty valuations, but their share prices have slumped since then amid concern about slowing growth at both companies.

Zynga’s initial public offering priced at $10, while Groupon’s priced at $20.

JANA Partners, which often pressures the companies it invests in to change their business strategies or sell themselves, released its so-called 13-F filing Wednesday, which describes which U.S. stocks it owned at the end of the first quarter of 2013.

During the first quarter, the JANA Partners fund was up 6.1 percent. A spokesman for JANA declined to comment.

JANA’s stakes are likely to be passive investments because Zynga and Groupon have dual-class share structures that give management tight control of the companies.

In Groupon’s case, Executive Chairman Eric Lefkofsky, former Chief Executive Andrew Mason and director Bradley Keywell control more than half of the voting power through their ownership of class B shares in the company.

Zynga’s stock price has been under pressure as investors react to its slow transformation into a gaming company that’s focused on mobile devices such as smartphones, rather than desktop computers.

Groupon is undergoing a transformation too. The company is selling a lot more deals through smartphones and is listing longer-term deals in a searchable, online marketplace, a move away from its email roots.

Editing by Bernadette Baum and Steve Orlofsky

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