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Zynga under investigation as stock plummets while executives get rich

by Bill Hess on July 26, 2012

Newman Ferrara LLP recently announced that it will begin an investigation on behalf of shareholders that purchased Zynga stock.  Believing that the company misrepresented its potential profitablity, and breached numerous fiduciary duties as a publicly traded company.

This comes in the wake of Zynga slashing its earnings outlook for 2012.  A subsequent stock crash of 40% hit the market late last night, as a clearer picture of the social games maker’s financial health emerged in a quarterly conference call.  Zynga’s stock IPO’d at $10 per share in 2011 and is down roughly 70% on the year.

Making matters worse, Zynga as a company sold a secondary offering of stock to the public at $12 per share after the intial offering in 2011.  Marc Pincus the CEO of Zynga *allegedly later sold stock in his company then slashed the earnings outlook, leaving investors to hold the bag.

Numerous analysts have downgraded the company, and the shady business practices have left the social games maker with a black-eye.

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