Online Gaming Firm Zynga Back In Court

Published Friday, March 27, 2015 -
Online Gaming Firm Zynga Back In Court

Zynga the social online gaming company has been between the rock and the hard place with the courts previously and has now run into another snag with Zynga facing a lawsuit in the USA that alleges the firm defrauded shareholders regarding prospects before and after its initial public offering in December of 2011. The original lawsuit was dismissed some time ago however US District Judge Jeffrey White has recently decided that shareholders are able to go ahead with the existing claims.  

Judge White stated that testimonies made by confidential witnesses during the last court action supported claims that management executives at Zynga had intended to commit a fraud.

Reuters news agency reported that the allegations in the suit included  Zynga’s leaving out information regarding  declining user activity,  that it disguised how changes on the Facebook platform for its games could impact demand for Zynga games and it inflated its revenue forecast for 2012. The dramatic decline in the share price from a high in March 2012 of $15.91to a low of $3 after the company revised its financial postings and changed its proposed outlook

Judge White has rejected claims by Zynga tha it had delayed product launches, saying that it was “business puffery” for the company to say its product launch of games was “strong,” “robust” and “very healthy”. The judge also commented,

“Plaintiff alleges that the officers at Zynga obsessively tracked bookings and game-operating metrics on an ongoing, real-time basis with regular updates on the activity and purchases by every user of every Zynga game,” White continued to add,  “Confidential witnesses all corroborate that the updates on game users and spending data was readily accessible to Zynga's management.”

The shareholders alliance seeking compensation headed by David Fee, claimed that Zynga concealed its flaws allowing inside traders to sell $595 million of stock prior to the expire date, which enabled them to avoid a 75% decline in Zynga’s share value.


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