Zynga, the company behind the hit Facebook game Farmville, has fallen on tough times in recent years, so perhaps this piece of good news will bring a smile to the new CEO, Don Mattrick’s face.
A lawsuit levelled at Zynga in 2012 has been dismissed by a San Francisco court. The lawsuit accused the company, the then-CEO Mark Pincus, and ‘underwriters led by Morgan Stanley and Goldman Sachs & Co.’ of a variety of misdeeds, including fraud, insider trading and misleading investors both before and after the IPO in December 2011. They also claim that a variety of sensitive information, such as a drop in user activity, product launch delays, and planned changes using the Facebook platform for its games would negatively affect revenue and earnings, was concealed from investors in order to inflate stock sales to over $593 million, and thus protect Zynga’s assets.
The US District Judge behind the ruling, Jeffrey White, called the 110-page document “excessively long and prolix… [lacking the] relevent, basic factual details” to support the complaints the shareholders had. Judge White also dismissed claims linked to an April 2012 secondary stock offering, on the grounds that the named plaintiffs lacked legal standing as they did not buy shares in that offering.
The angry shareholders, however, vow that this if far from over; to submit a revised version. Joseph Tabacco, a partner at Berman DeValerio, the company representing the plaintiffs, said that “we are confident that the case will proceed, as we believe we will more than satisfy the court’s concerns when we file our amended complaint.”
Zynga’s IPO is a legacy that the company is struggling to forget, which isn’t surprising considering their stock prices dropped over 70% in only 8 months, from the Initial Price Offering of $10 to under $3 in August 2012. Zynga announced last month that they were planning to cut 15 percent of its workforce in an effort to to reduce costs. They are also planning to pay $527 million for mobile game developer NaturalMotion to ‘refresh its games pipeline’.
Zynga shares are currently at $5.08 on the Nasdaq.