Motion to Dismiss Denied in Securities Fraud Case Brought by Zynga Investors
Newman Ferrara LLP announced that on March 25, 2015, the Honorable Jeffrey S. White of the United States District Court for the Northern District of California denied a motion to dismiss filed by defendants Zynga, Inc. (“Zynga” or the “Company”)(NASDAQ: ZNGA) and other top executives seeking to dismiss claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in the action In re Zynga Inc. Securities Litigation, No. C 12-04007-JSW. Newman Ferrara is Co-Lead Counsel in the matter with the firm Berman DeValario.
The Amended Complaint sustained by Judge White alleges that Zynga, together with certain top executives, including Co-Founder and former Chief Executive Officer Mark Pincus, Chief Financial Officer David M. Wehner, and former Chief Operating Officer John Schappert, artificially inflated Zynga’s stock price and misled investors by: (a) making false and repeated assurances that Zynga’s bookings were robust when, in fact, they were declining and Zynga was having trouble monetizing users; (b) making false and repeated assurances that Zynga’s new game pipeline growth was robust when, in fact, it was suffering significant delays; and (c) failing to inform investors that a material change in Facebook’s online gaming platform would negatively impact revenue and bookings in 2012. In addition, the Amended Complaint alleges that Zynga insiders, including the defendants, obtained an early release of their lock-up agreement in order to dump nearly 50 million shares of personally-held Zynga stock in a Secondary Offering (garnering over half-a-billion dollars), just three months before reporting disastrous financial results in 2012 that sent Zynga stock plummeting to less than $3 a share.
Based on those allegations, Judge White found that the Amended Complaint supported claims of falsity and materiality and that plaintiffs “sufficiently alleged particularized facts to support a strong inference of scienter under Section 10(b).” And, commenting on the sufficiency of plaintiffs’ loss causation allegations, Judge White held that upon “the announcement of the true results and guidance, the stock price fell considerably, [and thus] the court finds that there is a triable issue of loss causation.”
With Judge White’s ruling, plaintiffs intend to aggressively pursue evidence in support of their claims and work toward class certification, an adjudication on the merits, and a favorable recovery on behalf of aggrieved investors.
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