Online game developer Zynga Inc (NASDAQ:ZNGA) has been sued by a shareholder on grounds of making misleading statement about its financial health.
Maker of the popular `Farmville' game, Zynga reported second quarter earnings that lagged analyst estimates while its forecasts for the future also disappointed the markets.
Earlier this year it told investors it expected bookings worth $1.45 billion in 2012 but failed to reveal that it was facing drop-off in users and there were delays in releasing new games, investor Mark DeStefano said in a fraud lawsuit filed in a San Francisco federal court on Tuesday.
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It was only while reporting its second quarter result last week that it disclosed all its unpalatable details, including delays in its new games and lowered forecasts, which led to a huge fall-off in its share prices, eroding investor wealth.
The lawsuit names Zynga's managers and underwriters as defendants, and seeks approval as a class action, or group lawsuit, representing all investors who purchased shares from Feb. 28 to July 25 and unspecified damages.
Shares of ZNGA have lost over 39% since reporting second quarter earnings after the company failed to meet analysts’ target and lowered its full year earnings outlook. Moreover, the stock has slumped over 70% from its $10 IPO price and 80% from its life time high of $15.91.