Zynga Inc (ZNGA) Sued by Investor For Making Misleading Statements

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.

Can ZNGA Shares Rebound? Get Free Trend Analysis 

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.