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).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net

To contact the editor responsible for this story: Peter Blumberg at pblumberg1@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.