NEW YORK, May 27, 2020 (GLOBE NEWSWIRE) -- Pomerantz LLP announces that a class action lawsuit has been filed against iQIYI, Inc. (“iQIYI” or the “Company”) (NASDAQ: IQ) and certain of its officers. The class action, filed in United States District Court for the Northern District of California, and indexed under 20-cv-02882, is on behalf of a class consisting of all persons and entities other than Defendants who purchased or otherwise acquired: (a) iQIYI American Depository Shares (“ADSs”) pursuant and/or traceable to the Company’s initial public offering conducted on or about March 29, 2018 (the “IPO” or “Offering”); or (b) iQIYI securities between March 29, 2018, and April 7, 2020, both dates inclusive (the “Class Period”). The plaintiff pursues claims against the Defendants under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”).
If you are a shareholder who purchased iQIYI securities during the class period, you have until June 15, 2020, to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at email@example.com or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
iQIYI, together with its subsidiaries, provides online entertainment services under the iQIYI brand in China. iQIYI’s digital platform provides a collection of Internet video content, including professionally-produced content licensed from content providers and self-produced content. The Company also provides membership, content distribution, online advertising, live broadcasting, online gaming and literature, e-commerce, and talent agency services.
On February 27, 2018, iQIYI filed a registration statement on Form F‑1 with the SEC in connection with the IPO (Registration No. 333-223263), which, after several amendments, was declared effective by the SEC on March 28, 2018 (the “Registration Statement”).
On March 29, 2018, iQIYI filed a prospectus on Form 424B4 with the SEC in connection with the IPO, which incorporated and formed part of the Registration Statement (collectively, the “Offering Documents”). That same day, iQIYI conducted the IPO pursuant to the Offering Documents and issued 125,000,000 ADSs to the public at the Offering price of $18.00 per share. iQIYI reaped approximately $2,182,500,000 in proceeds upon the IPO’s completion, after underwriting discounts and commission.
The complaint alleges that the Offering Documents were negligently prepared and, as a result, contained untrue statements of a material fact or omitted to state other facts necessary to make the statements made not misleading and were not prepared in accordance with the rules and regulations governing their preparation. Additionally, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operational, and compliance policies. Specifically, the Offering Documents and Defendants made false and/or misleading statements and/or failed to disclose that: (i) iQIYI inflated its number of users, total revenue, deferred revenue, barter transaction revenue, and barter sublicensing revenue; (ii) iQIYI masked these inflated metrics by inflating its expenses, the prices it pays for content, other assets, and acquisitions; (iii) iQIYI accomplished all the foregoing, in part, by improperly accounting for the number of users, revenues, and expenses attributable to its business partners; and (iv) as a result, the Offering Documents and the Company’s public statements were materially false and/or misleading and failed to state information required to be stated therein.
On April 7, 2020, Wolfpack Research (“Wolfpack”), a global financial research and due diligence firm, published a report (the “Wolfpack Report”) alleging that iQIYI “was committing fraud well before its IPO in 2018 and has continued to do so ever since.” For example, Wolfpack estimated that iQIYI inflated its 2019 revenue by approximately RMB8 billion to RMB13 billion, or 27% to 44%, by overstating its number of users by approximately 42% to 60%. Wolfpack also alleged that the Company then “inflates its expenses, the prices it pays for content, other assets, and acquisitions in order to burn off fake cash to hide the fraud from its auditor and investors.”
Following the publication of the Wolfpack Report, iQIYI’s ADS price fell $0.79 per share, or 4.57%, to close at $16.51 per share on April 8, 2020.
As of the time, this Complaint was filed, iQIYI ADSs continue to trade below the IPO price of $18.00 per share.
The Pomerantz Firm, with offices in New York, Chicago, Los Angeles, and Paris, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, the Pomerantz Firm pioneered the field of securities class actions. Today, more than 80 years later, the Pomerantz Firm continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomerantzlaw.com
Robert S. Willoughby