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Zynga (NASDAQ:ZNGA) is being sued by two California law firms on behalf of investors who accuse the “FarmVille” creator of failing to warn about declines in user and revenue growth before reporting earnings last week that fell short and caused shares to plummet.
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Both firms are seeking class-action status on behalf of shareholders. They are taking Zynga to task for allegedly concealing threats to its business and sales growth, including changes Facebook (NASDAQ:FB) made to its platform that made it easier for users to find rival games.
The social gaming company, which grew its large user base through integration with Facebook, last week reported quarterly results well below expectations, and further, slashed its full-year forecast. Shares plunged 42 percent to a record low, and analysts cut their recommendations on the stock.
“Zynga misrepresented or failed to disclose material adverse facts about its business, operations, and growth prospects,” according to a lawsuit filed late on Monday by Kessler Topaz Meltzer & Check LLP.
The lawsuit accuses Zynga of concealing declining user numbers and lower sales of virtual goods, the company’s prime revenue source. The second lawsuit, filed by Robbins, Geller, Rudman and Dowd LLP, echoed many of the same allegations.
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