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Posted By Robert G. about 9 months, 2 weeks ago
They will be seeing a lot of red right now…
I think it is safe to say the bubble has finally burst for social gaming conglomerate Zynga.
Following their 40% stock decrease nearly six days ago, Zynga has been in very hot water since then. Not due to their $23 million loss, but rather the strong allegations of insider trading that occurred before the stocks fell. The paper trail begins back in April, when Zynga created a “secondary stock offering” that allowed several higher ups the chance to cash out of Zyngas’ stocks. At $12 per share, those said investors withdrew over 43 million shares totaling over $516 million.
Normally this sounds ok, but it should be noted that those accused of cashing out of Zynga’s stock did so for the full amount, all at the same time. The list includes CEO Marc Pincus, COO John Schappert, and several larger corporations including Google, Istitutional Venture Partners, and Union Square Ventures. The full list is unknown, but Yahoo’s Henry Blodget was able to detail some key people and entities, as well as the full amount that they each cashed out:
Here are some of the selling shareholders:
Marc Pincus, Zynga’s CEO, sold 16.5 million shares for $200 million
Institutional Venture Partners, a Zynga investor, sold 5.8 million shares for $70 million
Union Square Ventures, a Zynga investor, sold 5.2 million shares for $62 million
Google, a Zynga investor, sold 4 million shares for $48 million
SilverLake Partners, a Zynga investor, sold 4 million shares for $48 million
Reid Hoffman, a Zynga investor, sold 688,000 shares for $8.2 million
David Wehner, Zynga’s CFO, sold 386,000 shares for $4.6 million
John Schappert, Zynga’s COO, sold 322,000 shares for $3.9 million
Reginald Davis, Zynga’s General Counsel, sold 315,000 shares for $3.8 million
And so on…
In the wake of the insider trading allegations that look fairly transparent with the current disclosed evidence, Zynga has now come under fire from several sources. Six law firms have since then filed lawsuits against Zynga corp, including Johnson & Weaver, Newman Ferrara, and Whol & Frutcher. The lawsuits entail several key charges, including changes in the stock’s “lock-up” procedures, which allowed stocks to be sold off as early as possible, and essentially withholding information to a majority of their investors, along with several other undisclosed allegations at this time.
With information trickling down as Zynga essentially begins to unravel before our eyes, it is clear that the impact of this entire debacle will hit them even harder in the long run. Their user base is down, and Facebook is also beginning to falter as their stock price has dropped heavily since they went public. Will this effectively kill Zynga? It is still too early to tell, but at this point, the Facebook monster is in dire straights.
Sources: Time, Yahoo.com, Venture Beat , Chicago Tribune
Zynga’s next title:
State Prison Ville.
Too much of a coincidence that four of those exec’s offloaded (all?) of their shares in short period of time.
I feel bad for their grunt workers. Never liked their games, but they don’t deserve to be maligned because of the bad decisions of their bosses. I hope that if Zynga does fall, the people on the bottom of the totem pole can fine new work.
The execs can kiss my ass for all I care.
Hopefully this means the end of Zynga, and hopefully this takes FacePalm… er…. FaceBook along with it.
We may very well soon be free of crappy social games for good.
Everyone Rejoice. I know I am.
erm, you do know that many of the redundant and closed down game studios this past year have moved on to work in the social/mobile games market. Crytek is moving away from making AAA games to work with the F2P model.
I hope Zynga gets what it deserves.
Doooooh!