New Oriental faces class law suit in the US
Updated: 2012-08-30 17:27
Holzer Holzer & Fistel, LLC, a law firm based in the United States, announced on Wednesday that it is launching a class law suit against New Oriental Education & Technology Group Inc. on behalf of investors who bought New Oriental's American Depository Share (ADS) between July 21, 2009 and July 17, 2012, according to foreign media reports.
Filed to the United States District Court, S.D. New York, the lawsuit charged the New Oriental for being unable to disclose to the investors that a considerable number of schools and learning centers under its name were not owned by the New Oriental but were only leased to franchises to operate. Its financial report also overstated the financial results.
In fact, New Oriental is not the first China concept stock that has encountered lawsuits in a foreign country, the International Finance News reported Thursday.
During the past two years, a group of Chinese enterprises listed in the US have been revealed committing financial fraud. Trapped in a credibility crisis, of all the China concept stocks listed in the US, 19 chose to delist in the first half of 2012.
To boost market confidence, many Chinese enterprises listed overseas also started to buy back their shares. According to a report released by ChinaVenture Group, in 2012, there have been in total 22 China concept stocks that have proposed stock buyback plans, with the total buyback costing $875 million.
June witnessed notable companies like CTRP, GAME and Elong announcing one after another to carry out their buyback plans, making up 66 percent of the total dollar amount involved.
Analysts say that China concept stocks should avoid mistakes in finance management, leaving no loopholes for short sellers. "Some Chinese enterprises have flaws in operation and management, but in pursuit of profit, they walked overseas without making sufficient preparation. That's why they got hit and hurt when confronted with American laws and regulations," says Tan Yaling, Standing Director of China Association for International Economic Cooperation.