Zynga faces lawsuit for blocking Abu Dhabi firm from investing [Updated]

Social games investments
Could you imagine what the inbox looks like at Zynga's legal department at this point? Zynga has been sued by Alpha Investments, and Abu Dhabi-based investment firm, for blocking the firm from buying Zynga shares, Social Times reports. A complaint was filed by the firm in Delaware Chancery Court when Zynga stopped Alpha Investments from closing a deal with Andrew Trader that would pay him $12.87 million for his 1 million shares in the company.

Zynga put a halt to the transaction by limiting when Alpha could sell the shares it was about to acquire. This is where things get confusing. A company has apparently 30 days from when it stops a transaction of its stock to buy the stock itself under right of what's called the first refusal clause. However, Zynga refused to do this, but then stopped the deal in its tracks by contacting the trading company that was handling the sale, according to Social Times.

Now, the deal sits in limbo and Alpha Investments has resorted to legal action. However, deputy general counsel at Zynga, Jay Monahan, claims that it is well within federal and state law to stop the deal. But why would Zynga want to stop this deal anyway? The purchase that Alpha Investments would have made valued Zynga at $6.2 billion, according to Arabian Business. First of all, this would reduce its current valuation of over $9 billion by a huge amount. Second, it's unknown whether this amount could put Alpha Investments on the board of Zynga's major shareholders, but we doubt the company is willing to take that risk. Especially in the middle of its global conquest.

Update: Zynga's official statement:

"We insist on full compliance with federal and state securities laws. Secondary markets for privately held stock have added to the complexity of legal compliance, particularly where buyers and sellers may have asymmetrical information. Sometimes would-be buyers do not fully understand or appreciate the need for such compliance." - Zynga

What do you think could happen to Zynga if this investment went through? If Zynga ever went public, would you invest? Sound off in the comments. Add Comment.
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