Please Don't Gamble On Zynga's Gambling Gamble

$ZNGA $FB  The markets are abuzz today with the news that social-gaming company Zynga hired  Maytal Olsha, a former online-gambling executive, as its new chief operating officer. Investors are apparently loving the news that the beleaguered company may indeed have a plan for profitability after all, this after the Zynga's first gamble, going "all in" with Facebook selling virtual produce, fell flat. But with shares up over 5% on the news, is now a good time to escape this falling knife of a stock that's already lost two-third of its value so far this year? Indeed.

There are a lot of things not to like about the Zynga story.  The company came public last year with a tremendous amount of hype, but little in the way of management experience or  expertise, let alone profits. Since then, shares have steadily tanked, as Zynga continued to disappoint on their promises and Wall Street quickly became disenfranchised.  Then came the flood of senior-level management defections, a total of eight since August.  

Apparently, gambling with their shareholders' money is not enough for Zynga however, as the company's new strategy now hinges on the hopes that the U.S. and foreign countries will loosen their online gambling laws, thus allowing the company to enter the $30 billion real-money online gambling space.  Nice.

So here we have a company with only a shell of its former management team remaining and a track record of dismal failures and disappointments that suddenly wants to pivot and enter the highly volatile, and some would argue questionable, world of online gambling, all within a year of its IPO. I can't believe you're not already on the phone to your broker!

Zynga CEO Mark Pincus said earlier this year that his company plans to launch its first online gambling product in the international market by the first-half of 2013. Needless to say, I think this company has a lot to prove to investors before it would be worthy of your investment. Perhaps we'll revisit this name in the second-half of 2013.