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Former Zynga manager sues social game company over shares lock-up
Former Zynga manager sues social game company over shares lock-up
April 8, 2013 | By Mike Rose

According to a lawsuit from a former Zynga product manager, the company allegedly barred non-executive employees from selling their shares following the initial public offering in 2011, while some executives were able to cash out early.

Social games company Zynga went public at the end of 2011, and former employee Wendy Lee says that the company barred all shareholders from selling their Zynga shares for 165 days, reports Bloomberg.

However, this lock-up was waived for some executives in March, and subsequently more than 40 million shares were sold in a secondary offering.

In a complaint to a Delaware Chancery Court, Lee alleges that these executives "nearly doubled the proceeds from their sales," while Lee and other employees were left to make losses on their shares a couple of months later.

That's because Zynga's share price dropped dramatically in the months that followed the IPO -- in fact, by the time Lee was allowed to sell her shares, Zynga's share price had dropped by 49.3 percent, and she ended up selling her 30,000 shares for $3.15 each, after she'd originally bought them for $3.805.

Lee is asking the court to order those executives who benefitted from early sales to pay damages to those non-executive shareholders who lost out because of the lock-up. Gamasutra has contacted Zynga for a response to the lawsuit.

This wasn't the only shares-based controversy to come out of the Zynga IPO. Before the company had even gone public, some staffers were accusing CEO Mark Pincus of demanding that some early employees return their not-yet-vested stock or face termination.

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Michiel Hendriks
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The shares where "free to play". But if you wanted to sell them you had to either grind to gain enough credits, or buy the executive package via an in-app purchase.

Andrew Pellerano
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When the employee lockup ended shares were in the $7-$8 range and were still near $6 when the trading window closed again. You be the judge.