Streaming video portal subject of class action
Updated: 2015-03-30 05:07
By AMY HE in New York(China Daily USA)
Youku and some of its executives "violated the federal securities laws by disseminating false and misleading statements to the investing public," according to a statement from Milberg LLP, one of several law firms participating in the suit.
The law firms allege that Youku — listed on the New York Stock Exchange as YOKU — made false and misleading statements about its revenue, failed to properly record non-monetary transactions, and lacked "internal controls over financial reporting." As a result, Youku's financial statements were false and misleading, the law firm said on March 26.
The lawsuit also alleges that the Beijing-based streaming portal of failed to properly account for its licensed content, according to a copy of the complaint filed on March 25 by Pomerantz LLP and Bronstein Gewirtz & Grossman LLP, two other law firms participating in the class action.
Youku Tudou announced on March 17 that it would release fourth-quarter results on March 19, which investors said "raised red flags" because it gave them only two days' notice to prepare for the company's earnings announcement.
On the day earnings were announced, the company reported a net loss of $51.3 million, compared to the $4 million loss reported in the same quarter in 2013. The company's stock dropped 11 percent on March 20, closing at $13.50, down from the $15.15 per share on March 19, according to the complaint.
Youku Tudou also said that the Securities and Exchanges Commission is investigating "certain aspects" of the company's past accounting practices, and announced that it is "evaluating the impact to its 2014 and historical financial statements," according to the lawsuit filing.
After the company reported its losses, Deutsche Bank downgraded Youku to "sell'' from "hold'' and said that the company will find it difficult to recapture momentum in the Chinese Internet television market.
Several participating law firms — Milberg LLP, Glancy Binkow & Goldberg LLP, Rigrodsky & Long — did not respond to China Daily's request for comment. Pomerantz LLP declined to comment, citing the ongoing litigation.
Shareholders and investors who have lost money in their investment in Youku Tudou and are interested in participating in the class action have until May 25 to file and join the class action lawsuit. After then, the court will appoint the lead counsel with the lead plaintiff, and other cases will be consolidated into one lawsuit.
Youku Tudou, formerly known as Youku and founded in 2003, streams video online, similar to what the US' Youtube does. Youku merged with Tudou — formerly another video-streaming platform — in 2012 to become Youku Tudou, and the company has more than 500 million active users.
Youku made its New York Stock Exchange debut in 2010 with shares priced at $12.80. The company raised $203 million for its IPO. The company currently has a market cap of $2.62 billion.
Chinese e-commerce giant Alibaba invested $1.22 billion in the streaming portal in April 2014, holding 16.5 percent of Youku Tudou shares.