SAN FRANCISCO — An investor class action accusing Zynga executives of plotting to sell their stock before shares tumbled is too vague to move forward, a federal judge has ruled.
In a six-page order issued Tuesday, U.S. District Judge Jeffrey White granted Zynga’s motion to dismiss In re Zynga Inc. Securities Litigation, 12-04007. Represented by Berman DeValerio and Newman Ferrara, plaintiffs claimed that Zynga executives touted the company’s health before and after its 2011 IPO, only to sell their own shares before the stock collapsed. White ordered the plaintiffs to revise their claims to include more specifics.
“At 386 paragraphs and 110 pages, plaintiffs’ complaint is excessively long and prolix,” White wrote. “Despite the length of the complaint, plaintiffs fail to include the relevant, basic factual details in support of their claims.”
Nicole Lavallee of Berman DeValerio declined to comment, as did Zynga lawyer Jordan Eth of Morrison & Foerster. The San Francisco-based company hailed the judge’s decision.
“We are pleased with today’s order and continue to believe in the merits of our defense,” a Zynga spokeswoman wrote in a statement. “The focus for Zynga is on our forward-looking business and delivering on our 2014 goals of growing and sustaining our proven franchises and creating new hits.”
Plaintiffs claim that Zynga executives held back several key pieces of information to mislead investors about the company’s prospects. Zynga failed to disclose the company’s declining bookings as well as delayed product releases and an upcoming change to Facebook’s platform that would harm the business, according to the complaint.
The case targets former Zynga CEO Mark Pincus, former CFO David Wehner, former COO John Schappert and current CFO Mark Vranesh. Each sold millions of dollars worth of Zynga stock in the company’s secondary offering in April 2012, according to the complaint.
In July 2012, Zynga’s stock price fell more than 37 percent after the company announced disappointing second-quarter results, according to the complaint.
Plaintiffs also filed claims against the company’s directors and banks, including Morgan Stanley & Co., Goldman, Sachs & Co., J.P. Morgan Securities, Merrill Lynch, Pierce, Fenner & Smith Inc. and Barclays Capital Inc., which underwrote the IPO.
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