Zynga under investigation following share price crash

"Failure to disclose materially adverse facts about its business"

Zynga shares have plummented 40%, it's posted a net loss of $22.8 million for the second quarter of 2012, and now it has law firms breathing down its neck.


According to reports, multiple law firms are investigating the social gaming giant on suspicions that the firm failed to disclose "materially adverse facts" about the business in the lead up to its share price dive.

It was recently reported that a number of Zynga insiders sold large amounts of stock just months before their value bombed, sparking suspicions that they withheld insider knowledge about the state of the business.

Levi & Korsinsky - one of the same firms also currently investigating similar claims against THQ over uDraw - is investigating "concerns that Zynga misrepresented and/or failed to disclose materially adverse facts about its business and financial condition".

The Facebook games group said in a investors call this week that it faced "new short-term challenges" that impacted the business for the quarter.

It also lowered its outlook for the rest of 2012, citing "delays in launching new games, a faster decline in existing web games due in part to a more challenging environment on the Facebook web platform, and reduced expectations for Draw Something."

[ SOURCE: Kotaku ]