Zynga Under Investigation After Stocks Plummet
By Joseph Christ on July 28th, 2012 (10 comments)
You better make sure your crops are watered and your pigs are fed, because things are looking fairly dire for Farmville creator Zynga.
Zynga stock has fallen nearly 40% over the past few weeks, and they have recently posted a net loss of $22.6 million dollars for the second quarter of 2012. That would all be bad enough if it wasn't for news reports that a number of Zynga insiders had sold off large amounts of stock three months before the fatal crash we are seeing now. Some of those who suspiciously dumped the stock are CEO Mark Pincus who sold roughly $200 million worth of stock in April, and then there is Zynga's CFO, COO, and General Counsel all following suit for a total combined 43 million shares sold for a payout of $516 million.
This is what's known as possible insider trading, and it's extremely illegal.
Now, multiple law firms are investigating Zynga and looking closely at these stock sales under the suspicion that the company failed to disclose, or even hid, "materially adverse facts" from its investors.
According to Kotaku the firms currently investigating Zynga are "Schubert Jonckheer & Kolbe, Newman Ferrara, Johnson & Weaver, Wohl & Fruchter, and Levi & Korsinsky." Some of the accusations being made are whether CEO Mark Pincus had insider knowledge that the crash was coming before the trades were made, and "concerns that Zynga misrepresented and/or failed to disclose materially adverse facts about its business and financial condition."
This represents just the latest in the current fall of a giant who once stood tall as social gaming started to make its way into popularity. If Zynga experiences a dramatic demise, especially one that includes people being shuffled off to prison, it'll be interesting to see how this effects the market as a whole. And those who thought that social gaming was nothing more than a paper tiger might have some hard evidence to state their case.
Joseph Christ is the Reviews Editor and a Podcast Personality at 4Player. Specializing in reviews, editorials, drinking, and saying inappropriate things about gaming franchises that are beloved by millions, his satirical and sometimes edgy style offsets a more serious and penetrating substance lurking below the surface. He is also the host of the Cocktail Time Podcast. You'll follow his Twitter if you know what's good for you.
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