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Zynga’s stock has crated to around $3 from an IPO price of $10.Or, more importantly, it’s now under $3, down from $12 when Zynga had a secondary offering of shares in April earlier this year.
During that secondary offering, insiders like Mark Pincus and a number of investors cashed out, selling about $516 million in stock.
Then Zynga had a disastrous second quarter where it reduced its full-year guidance, sending the stock tumbling.
Because the timing of the secondary offering, much of the Internet — which already loves to hate on Zynga — is starting to wonder if Zynga’s top executives knew something the rest of the world didn’t know.
And now, as to be expected in a situation like this, a law firm has filed an insider trading lawsuit against Zynga, Ben Popper of The Verge reports.
Anything’s possible, but we highly doubt Zynga’s top executives would really do something as colossally stupid as commit insider trading.
First, for these guys, it’s not a lot of money in the big picture. Much of their wealth is still locked up in Zynga’s stock.
Second, if Zynga’s insiders had some kind of crystal ball telling them that Facebook games were going to decline as much as they did, dealing a crippling blow to their business, they would have put much, much more emphasis on mobile.
Zynga is now focusing more on its mobile games and it is planning on releasing real-money gaming properties, a nod at a billion-dollar opportunity in online gambling. Pincus has said Zynga is working on several iterations of the Draw Something franchise and the With Friends franchise, its most popular mobile franchises.
Pincus also said Zynga sees “opportunities to grow bookings to move male-oriented games,” referring to hardcore games like those produced by Kixeye. This is indicative of a change in strategy when it comes to Facebook, but it’s only coming after its weak second quarter.
None of this reads like an executive team that is ready to abandon the company after cashing out a little bit of stock.
People make terrible mistakes all the time, even for relatively small sums of money. No doubt, these guys could have screwed up to quickly pocket millions.
Unless Pincus turns out to be some kind of James Bond-level villain (which remains to be seen), we think he and his team are more interested in building a lasting business than cashing out short-term for a few million dollars.