A whole bunch of Zynga’s investors unloaded stock in the once high-flying company at $12 back in April. The investors, which largely consisted of Zynga’s key personnel and a few major companies like Google and some private investment firm backers, somehow managed to unload the stock at precisely the right time before it tanked.
Sound suspicious to you? You’re not the only one!
Schubert, Jonckheer, & Kolbe, LLP; Johnson & Weaver, LLP; Bronstein, Gewirtz, & Grossman, LLC; Levi & Korsinsky; and Wohl & Fruchter, LLP have all announced they are actively investigating whether executives and shareholders including CEO Mark Pincus breached their fiduciary duty and broke securities law in selling over $500 million worth of stock in a secondary stock offering this April. In selling that stock at $12 a share—well above the current $3 share price brought on by the weak earnings report—the executives allegedly “misrepresented and/or failed to disclose materially adverse facts about its business and financial condition.” In other words, they knew this was coming, and they sold their own interests rather than warning the general shareholders.
A lawsuit is pretty much inevitable, although it’s unlikely to turn up any evidence of insider trading. There are just too many outside parties involved — either it’s a total coincidence or Zynga’s insiders ran one hell of a flim-flam to convince outside parties to sell with them hoping nobody would notice. It’s worth noting the price was up after a disappointing IPO, so it probably looked like a good time to unload some of their stock. Worth noting is that everybody involved still kept a substantial majority of their shares, meaning they’ve taken a massive financial beating.
The lawsuit will, however, likely turn up some dirt — Zynga’s stock structure is designed to lock out common shareholders and keep them in the dark, so there’s going to be some transparency that Zynga is not going to enjoy. Mark Pincus, meanwhile, gets to keep $200 million. But at least he’s no longer a billionaire.
Zucks must be totally laughing at his pathetic Maserati collection. HE ONLY HAS FIVE!
image courtesy David Berkowitz on Flickr