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Popular Game Maker Faces Lawsuit Tied to IPO Fraud

Popular Game Maker Faces Lawsuit Tied to IPO Fraud

Zynga Inc., the company responsible for FarmVille is currently facing a lawsuit alleging the gaming company defrauded shareholders before and after going public in 2011. The lawsuit alleges that 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,” making any omission about company profits entirely intentional.

The lawsuit further alleges that Zynga hid potential weaknesses from shareholders, allowing insiders to trade $593 million of stock prior to the expiration of a post-IPO lockup. According to plaintiffs, this action allowed the company to avoid a 75 percent drop in its share prices over the following four months.

IPO fraud occurs when a company, along with the bank that represents it, misleads potential investors to believe the business is healthier than it actually is. This is commonly achieved by omitting information when trying to woo shareholders – perhaps in the hope that things will correct themselves before earning reports are released. Things seldom correct themselves during this time, often leaving shareholders at a considerable loss.

If you have suffered economic damages following any type of stock fraud, please contact Colling Gilbert Wright online or by calling (407) 712-7300 to schedule a free consultation with one of our experienced attorneys.