Mon, Apr 08, 2013 | 03:17 BST
Zynga investor files suit over executive exemption from stock lockup
One Zynga shareholder and former employee has filed suit against the social publisher, claiming lower-level staff and general investors were blocked form selling stock while executives made a packet doing just that.
Bloomberg reports one-time Zynga product manager Wendy Lee alleges executives sold 40 million shares for more than $200 million. Today, that same slice of Zynga’s stock would be worth around $142 million, a notable depreciation.
The sales are said to have occurred during a 165-day lockup period, during which other investors were barred from offloading their shares. The lockup ought to have lasted right through May 2012, but was lifted for a handful of high-ranking shareholders in March 2012.
Lee said executives “nearly doubled the proceeds from their sales” in the early sale, and the chance to cash out was not offered to anybody else. “Zynga’s share price had dropped 49.3 percent” by the end of the lock up, the investor said, and her own 30,000 shares, which cost her $3.80, finally sold for $3.15 – an obvious loss.
The suit asks that those who benefited from early sales pay damages to those who didn’t, and is being filed on behalf of all non-executive Zynga shareholders.
This isn’t the first time that eyebrows have been raised over this particular incident; although no evidence was found at the time, the financial world reacted badly when Zynga extended the lockup ahead of a price crash, just after allowing executives to off-load shares.
At the time, it was believed that Zynga was frantic to stop a mass dump of its stock, but trading wasn’t kind to the social publisher anyway, and the months following its record December 2011 IPO were marked by bitter downturns, eventually dropping a full 71% in the last 12 months alone.
Zynga announced changes to its compensation model this weekend, following a year punctuated by high-profile departures, which brough its stock price back up by 10¢ to $3.55.