Zynga hit with investigation over questionable stock sell-off

Jul 27, 2012
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Things just went from bad to worse for some of the folks at Zynga. Earlier this week the company delivered a less-than-stellar quarterly financial report, and now Ars Technica is reporting that some executives and shareholders are under investigation for dumping over $500 million in stock before the bad news hit and Zynga's stock price took a dive. In other words, a few Zynga higher-ups could be in a whole lot of trouble.

The word "could" is key here, as you naturally can't get in trouble for just selling off your shares. What five law firms want to find out, however, is whether or not these people sold off their stock with the knowledge that a bad quarterly report was on the way. The sell-off evidently occurred back in April, when Zynga's stock was selling at $12 per share. These days, thanks in part to that underwhelming report for Q2, it's selling at only $3 per share, so you can see why law firms are interested in the circumstances surrounding the sell-off.

Some of Zynga's biggest players are being investigated, including CEO Mark Pincus, COO John Schappert, and CFO Dave Wehner. Strange as it may seem, Google is also included in this investigation, along with a number of venture capital firms. Zynga has yet to be hit with a lawsuit, but Ars points out that with so many law firms conducting the investigation, it may not belong before the company finds itself dealing with a class-action lawsuit from investors. If that happens, it'll be nothing but bad news for the social games maker, so stay tuned.


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