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Law firms investigating Zynga for insider stock sell-off (Arstechnica)

Schubert, Jonckheer, & Kolbe, LLP; Johnson & Weaver, LLP; Bronstein, Gewirtz, & Grossman, LLC; Levi & Korsinsky; and Wohl & Fruchter, LLP have all announced they are actively investigating whether executives and shareholders including CEO Mark Pincus breached their fiduciary duty and broke securities law in selling over $500 million worth of stock in a secondary stock offering this April. In selling that stock at $12 a share—well above the current $3 share price brought on by the weak earnings report—the executives allegedly “misrepresented and/or failed to disclose materially adverse facts about its business and financial condition.” In other words, they knew this was coming, and they sold their own interests rather than warning the general shareholders.

Similar trends are popping up for any companies that feed off FB or are FB. FB itself was sued over withholding material information from shareholders the day before the IPO. Seems like Zynga is in similar situation. Now what we have to watch out for is the stock dump by FB insiders when they are allowed to sell and the associated decrease in price (could possibly happen). If a significant stock dump happens (which I can sense it will – due to over valuation of the stock), then that is a signal for ‘investors’ to take their money somewhere else.

Zynga Chart from Google Finance

Alpha

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