By Gerry Shih
SAN FRANCISCO, July 31 Zynga Inc was
hit by a pair of lawsuits from shareholders accusing the
"FarmVille" creator of failing to warn about declines in user
and revenue growth before disastrous results sent its shares
into a tailspin last week.
Two California law firms filed lawsuits seeking class-action
status on behalf of stockholders this week, taking the company
to task for allegedly concealing threats to its business and
sales growth, such as Facebook platform changes that made it
easier for users to find rival games.
The social gaming giant behind a plethora of Facebook
games like "Mafia Wars" last week stunned Wall Street by
reporting quarterly results well below expectations and slashing
its 2012 revenue forecast.
Its stock plummeted 42 percent to a record low and analysts
cut their recommendations on the stock.
"Zynga misrepresented or failed to disclose material adverse
facts about its business, operations, and growth prospects,"
according to a lawsuit filed late on Monday by Kessler Topaz
Meltzer & Check LLP.
Zynga's results also cast a pall over Facebook because the
No. 1 social network relies on Zynga for roughly 15 percent of
The lawsuit accused Zynga of concealing declines in users
and the sale of virtual goods -- such as a cow in "FarmVille" --
the company's prime revenue source. A second lawsuit filed
Tuesday by Robbins, Geller, Rudman and Dowd LLP echoed many of
Zynga declined to comment.
The company founded by Mark Pincus was among a crop of
fast-growing consumer Internet companies, including Groupon Inc,
that debuted in 2011 with much investor enthusiasm but have
since lost vast amounts of market value as Wall Street
questioned the sustainability of their growth trajectories.
Zynga shares fell 2 percent to finish Tuesday at $2.95, a
far cry from their December $10 debut price.