Zynga (ZNGA, NASDAQ, 52 week range 2.97 – 15.91), the creator of the popular Farmville game on Facebook, saw its stock drop almost 40 percent in one day, closing at $3.18 per share, after posting dismal earnings for the second quarter 2012 and lowering its outlook for the full year 2012.

Zynga reported earnings of $0.01 per share on revenues of $332 million for the quarter. Analysts were looking for per share earnings of $0.05 on revenues of $342 million. The more shocking news was that the company now is guiding Wall Street that they are looking for earnings between $0.04 to $0.09 per share for the full year 2012. It’s a far cry for its previous guidance back in April, estimating between $0.23 and $0.29 per share.

Back in April, Zynga did a secondary stock offering solely for insiders. It sold 43 million shares at $12 per share, netting about $516 million. The original IPO price was $10 per share. As reported by Henry Blodget at Yahoo! Finance, Morgan Stanley, Goldman Sachs and Bank of America managed the offering and were paid $15 million in fees and Zynga paid about $1 million in expenses related to the transaction.

None of the $516 million went to the company. Some of the recipients were previous investors. Institutional Venture Partners received 5.8 million shares for $70 million, Union Square Ventures received 5.2 million shares for $62 million and Google Ventures received 4 million shares for $48 million. What has caused questions is that Zynga’s CEO Marc Pincus, CFO David Wehner and COO John Schappert also sold shares to the tune of $200 million, $4.6 million and $3.9 million respectively.

With Zynga shares now down about 70 percent from that faithful day in April, their timing was pretty good. Most of the time, when you look at insider selling, it is usually generated by the need to take some money off the table and diversifying your holdings. Management must have known what the direction the company was taking back then. So the question is, did they know how bad the share price would react? Or was it just time to bring in the harvest?