Sometimes people say bad things come in threes. This is nothing more than a superstition skewed by the ability of people to deal with problems.
Shareholders of Zynga, Inc. (NASDAQ:ZNGA) are getting a first hand experience of how bad things may come in fours, fives, sixes, or just a long string of things going wrong.
After the announcement of the second quarter results destroyed nearly 40% of the value of ZNGA stock, it hit a bottom of $2,70 on Aug. 1. Yesterday ZNGA closed up 3.07% at $3.02, but a significant recovery is far from certain.[BANNER]
On Aug. 1 it became clear that a class action lawsuit had been filed against Zynga for violations against federal securities laws for insider trading. The lawsuit alleges that the price of ZNGA had been artificially inflated and insiders had been selling stock during offer periods and that activity had been concealed from the market, resulting in investors’ losses.
This isn’t the only legal trouble for ZNGA. On Aug. 3 EA filed a lawsuit against the company over Zynga’s game The Ville. EA claims Zynga infringed copyrights to The Sims Social.
Zynga hasn’t deemed it necessary to issue a press release addressing those matters. Instead, the company announced the launch of a “next-generation cooking game.” That may indeed be important, since the company’s future growth is no longer assumed certain.
The results for Q2 revealed that more than 60% of all revenue was generated by 4 titles, and one of them, Mafia Wars is quickly losing popularity and in the last year and a half revenues have gone down more than 50%. The purchase of Draw Something didn’t work out well either. The game which is basically Pictionary for the mobile, has gone from more than 14 million daily active users in April, to around 3 million these days.
Another blow came on Aug. 8, when John Schappert got out of ZNGA resigning from his positions as COO and a director. The 8-K filing says that Mr. Schappert’s departure isn’t connected with any disagreements with the company, but it’s not a secret that after a reorganization Mr. Schappert was no longer overseeing game development.
On the bright side, Farmville is doing ever-so-well and hardly anyone would argue that currently Zynga is the most successful mobile app developer. Still, the company will have to make a big U turn if it wants its shareholders to be happy.
