Zynga shares witnessed a substantial drop in short interest during the month of March. As of March 13th, short interest in the gaming firm totaled 67,908,762 shares, which is a drop of 4.4% from the February 27th total of 71,039,638 shares. Presently, 8.9% of the company’s shares are sold short.
Shareholders allowed to sue Zynga for fraud
Zynga is struggling to win back investor and player confidence, and moving forward, it could face more challenges. Recently, U.S. District Judge Jeffrey White ruled that a group of Zynga shareholders can go ahead with their lawsuit, which alleges the game maker of fraud in the months leading up to its not so successful IPO.
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The lawsuit claims that Zynga’s management trapped the investors into thinking that the company was far healthier than it actually was. Afterwards, management offloaded their own shares before the internal bad news was revealed in the public, taking home more than $500 million.
Shareholders argued that Zynga did not inform them that changes at Facebook would adversely affect its games. Investors allege that the game maker knew about changes in advance, but did not choose to share this with the investors.
Towards the end of 2012, Facebook changed the rules, and Zynga games were restricted from automatic sharing of game progress on the platform.
Consensus rating of Hold
Several analysts have commented on the stock in recent months. Analysts at Vetr downgraded Zynga from a Buy to Hold, and assigned it a price target of $2.82 in a research note to investors on March 23rd. Zacks dropped the rating on the game maker from an Outperform to Neutral, and assigned a price target of $2.70 in a research note on February 19th. Piper Jaffray analysts assigned a $2.50 price target to Zynga, and gave a Hold rating to the stock in a research note to investors on February 13th. Analysts at Benchmark Co. dropped their price target from $2.45 to $2.36, and set a Hold rating in a research note to investors on February 13th. Presently, Zynga has a consensus rating of Hold and an average price target of $3.49.
On Monday, Zynga shares closed up 0.36% at $2.78, and year to date, the stock is up over 2%.