Zynga Sued Over Alleged Misleading Financial Statements
Zynga Inc. (ZNGA), the online game developer that missed analysts’ second-quarter revenue and profit estimates, was sued by an investor who alleged shareholders were misled about the company’s financial health.
Zynga told investors earlier this year it expected bookings, a measure of sales of virtual goods, of as much as $1.45 billion in 2012 with growth concentrated in the second half, while hiding a drop-off in users and delays in releasing new games, investor Mark DeStefano claimed in a securities fraud lawsuit filed in federal court in San Francisco yesterday.
Zynga, the biggest developer of games played on Facebook Inc.’s social network, rose to $15.91 in March from $13.49 in February and company insiders sold shares worth $500 million in a secondary stock offering in April, according to the complaint.
After the company posted lower-than-expected second-quarter earnings, disclosed delays in releasing games and lowered its full-year outlook on July 25, its shares fell 40 percent to $2.97, causing investor losses, DeStefano claimed.
The lawsuit, which names company managers and underwriters as defendants, seeks approval as a class action, or group lawsuit, representing all investors who purchased shares from Feb. 28 to July 25 and unspecified damages.
Dani Dudeck, a Zynga spokeswoman, declined to comment on the lawsuit in an e-mail.
The case is DeStefano v. Zynga, 12-4007, U.S. District Court, Northern California (San Francisco).
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