Facebook game maker Zynga would probably like to call a timeout right about now. Not only has the company stock dropped from a $10 IPO price to a much less awesome $2.95 as of today, but the social game maker has now been hit with insider trading allegations.
According to Business Insider, a scorned shareholder who goes by the name of Mark DeStefano has filed a lawsuit against the company alleging them of shady dealings. The accusations stem from a secondary offering of Zynga’s stock priced at $12/share that happened in April where key stakeholders such as CEO Mark Pincus cashed out for about $516 million in stock.
In the following months the company posted a horrendous quarter, causing stock prices to plummet. The timing of the secondary offering when considered in retrospect has drawn suspicion the select group who cashed out did so with knowledge that other shareholders did not possess.
Whether these allegations have any legs will weed its way out, but for now it is up to the stock prices to take a hit as sales numbers increase as holders abandon ship. This type of allegations can represent a scarlet letter of sorts, further compounding Zynga’s affairs as the stock hit an all-time low today.
It should be considered that although $516 million is a significant amount of coin, it is relative pittance to some of the parties who cashed out including Reid Hoffman, Google and Union Square Ventures. Even the Zynga executives who sold still have a significant amount of skin in the game.
For now, Zynga is attacking mobile with everything they have, and are strongly considering real money games that are akin to online gambling. It is also fiddling with popular mobile games such as Draw Something and Words With Friends in order to monetize them.
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