As we reported yesterday, social gaming giant Zynga had a rough quarter, with it posting a $22.8 million net loss and its stock dropping to as low as almost $3 a share.
Today, though, things may have gotten even worse. As Yahoo Finance reports, Zynga held a “secondary stock offering” back in April, during which various company insiders and investors sold around 43 million shares to the tune of about $516 million.
With this massive stock dump occurring just three months before the end of the Farmville maker’s poor quarter, the news certainly doesn’t look all that good, though there is not enough evidence to make any accusations of insider trading just yet.
CEO Mark Pincus himself sold 16.5 million shares for $200 million during the secondary stock offering, while the company’s CFO, COO, and various other investors, including Google, Union Square Ventures, Institutional Venture Partners, and a handful of others cashed out as well.
With the suspicion of improper behavior looming, a handful of law firms have announced that they will investigate claims against Zynga which accuse the company of violating various federal securities laws and breaching fiduciary duty.
Essentially, these firms will be trying to find out whether or not the Zynga insiders in question were aware of certain insider knowledge before they dumped their shares earlier this year. Firms that have already pledged to investigate include Schubert Jonckheer & Kolbe, Newman Ferrara, Johnson & Weaver, Wohl & Fruchter, and Levi & Korsinsky.
By Jeff Dunn