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Zynga (NASDAQ:ZNGA) has been one of the worst-performing IPO stocks in recent history. The company went public at $10 per share, in December 2011. It rallied up to about $16 shortly after the offering, but lately there seems to be a never-ending stream of bad news for the company and the industry. The latest issue was announced after the market closed on August 8. The company said Chief Operating Officer and board member,John Schappert has resigned from both positions.

This follows a string of disappointing news such as weaker than expected financial results, and a drop in Facebook (NASDAQ:FB) shares which is considered a proxy for Zynga due to its dependence on the company for a major portion of its revenues.

Just days ago, (NASDAQ:AMZN) announced it was launching "Amazon Game Studios" which will offer social and mobile games that compete with Zynga. has deep pockets and it can afford to lose money pursuing this new goal. It might also poach some key Zynga executives and game developers in the process. A recent Forbes article is titled "Amazon Game Studios Will Ensure the Death of Zynga." If Zynga is struggling to make a profit now, just imagine how much tougher it could get with new competition and the possibility of more key employees leaving.

Zynga shares were trading for about $13 in March and have plunged below $3 recently. Many investors have lost money in this stock, in fact most investors are losing money at current levels. That means Zynga shares could be a prime candidate for major tax-loss selling later this year. Many investors dump their worst performing stocks around November to December each year in order to offset gains in other stocks and harvest tax losses. This could launch a new wave of selling pressure in Zynga shares later this year, and that is when it might be time (if ever) to consider bargain-hunting in this and perhaps other badly beaten-down stocks in the social networking and gaming industry, like Facebook.

Zynga has a very challenged business model and that is not likely to change anytime soon. If it can produce new games and fend off competitors, it might make sense to try bottom-fishing in this stock at the height of tax-loss selling season later this year. But for now, it looks like the best strategy is to stay on the sidelines.

Here are some key points for ZNGA:
Current share price: $2.95
The 52 week range is $2.66 to $15.91
Earnings estimates for 2012: 7 cents per share
Earnings estimates for 2013: 11 cents per share
Annual dividend: none

Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.