US District Judge Jeffrey White in San Francisco has dismissed a shareholders' lawsuit
against game developing house Zynga. The suit alleged that Zynga misled prospective purchasers of its stock, in both the leadup to the inital public offering and through a series of difficult quarters financially.
Judge White ruled that shareholders didn't provide "relevant, basic factual details" on how Zynga executives inflated the stock price of the company by hiding relevant details about the company, which they allege included dropping payer involvement, launch delays, and a shift away from Facebook. The suit alleged that because of the ommissions, insiders were able to unload
$593 million of shares well before a post-IPO lockup ended, thus avoiding a precipitous drop in the stock price before and after the lockup expiration.
The initial April 2012 public offering was set at $10, and climbed to a peak of $12. The day after a bad quarterly earnings report was published in July of 2012, Zynga stock plummeted to less than $3. Executives that sold stock ahead of the report included CEO Marc Pingus, CFO David Wehner, COO John Schappert, and general counsel Reginald Davis. Zynga investors Institutional Venture Partners sold 5.8 million shares for $70 million, Union Square Ventures sold 5.2 million shares for $62 million, and Google sold four million shares for $48 million, all in the days before the quarterly earnings.