Zynga games, the leader in stealing ideas for social games, had a pretty bad week. Their stock took a colossal hit at the beginning of this week, but that isn’t the only problem they have to contend with.
So with their profits spiraling out of control, a number of investors which include founder Mark Pincus offered a secondary stock offering, which was all shares of their own dumped into the exchange. This was right before the stock took ANOTHER hit and went from $12 a share to just about $3. This of course was good for them as they netted about $516 Million dollars from this firesale. But the high could only last so long.
Marketwatch is reporting that a third party investigation company, Newman Ferra, is looking into these recent goings ons at Zynga. Saying that:
Newman Ferrara’s investigation focuses on whether Zynga misrepresented or failed to disclose material adverse facts about its business and financial condition including, among other things, that Zynga has been: (1) experiencing a rapid decline in user numbers of existing web games; (2) experiencing substantial delays in launching new web games; and (3) entirely dependent on Facebook’s online gaming platform. Newman Ferrara’s investigation also focuses on the 43 million shares of personally held stock sold by Zenga’s executive officers in April at a price of $12 per share for proceeds totaling $516 million. These insider sales were executed during the second quarter of 2012 shortly before Zynga reported terrible financial results for that quarter and prior to the corresponding 40% drop in Zynga stock price.
All I can say is that the time of believing that these non-tangible products like social games or social networks for that matter, have any real world value, is over. More to come as this story unfolds as I am very interested in the outcome. Regardless of what happens, social games are going to get a pretty big change.