Social issues: Zynga hit with lawsuit, UBS discloses loss on Facebook IPO

More social media news:

• Did Zynga executives engage in insider trading? That’s what a lawsuit filed Monday alleges. The Merc’s Jeremy Owens reports that the class-action suit charges the San Francisco social-gaming company with misrepresenting the state of its financial situation at the time of its secondary offering, during which CEO Mark Pincus and others sold their shares for more than $500 million in proceeds.

Last week, Zynga posted a worse-than-expected second-quarter loss of $22.8 million and lowered its outlook for the rest of the year, sending its stock plunging nearly 40 percent. Analysts downgraded the stock and expressed concern about the company’s business model, which relies largely on sales of virtual goods from its games.

Zynga went public in December with an IPO price of $10. Its shares have had a wild ride since, and are trading at $2.93, off more than 2.5 percent, as of this post.

• Speaking of wild rides, Zynga’s friend Facebook also has been on one since its initial public offering. Facebook also is facing investor lawsuits and other issues. Now UBS, Switzerland’s largest bank by assets, is saying its struggling investment bank lost $350 million on the Facebook IPO. And according to the Wall Street Journal, it will try to recoup its losses by going after Nasdaq, whose trading glitches caused havoc on one of the most highly anticipated tech IPOs ever.

Facebook went public in May, failing to deliver a first-day pop that other social networking companies had enjoyed. A lot of finger-pointing and second-guessing has followed. (See Facebook’s reception on Wall Street goes from lukewarm to frigid.)

Last week, the Menlo Park company reported its first earnings since its IPO, and the results didn’t help matters. While the world’s largest social network’s earnings were largely in line with what Wall Street was expecting, it continued to show slower growth, and it failed to provide a forecast for the current quarter or the year.

Facebook shares are trading near their lowest levels, down about 6 percent to $21.75 as of this post.


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