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GDS Holdings Limited

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Case Summary

Company Name
GDS Holdings Limited
Stock Symbol
GDS
Class Period
November 2, 2016 to July 31, 2018
Motion Deadline
October 1, 2018
Court
Southern District of New York

The complaint charges GDS and certain of its officers with violations of the Securities Exchange Act of 1934.  GDS is a leading developer and operator of high-performance data centers in China.  The Company claims that its facilities are strategically located in China’s economic hubs where demand for high-performance data center services is concentrated and its data centers have large net floor area, high power capacity, density and efficiency, and multiple redundancies across all critical systems.

The complaint alleges that during the Class Period, defendants made false and misleading statements and/or failed to disclose material adverse facts about the Company's business, operations and prospects.  Specifically, according to the complaint, defendants failed to disclose that the Company had overstated its utilization and occupancy rates, had made acquisitions with related parties at inflated prices, had used suspect capital and debt raisings despite large off-shore cash reserves, and had adopted unorthodox accounts receivable and payable practices.  As a result of defendants’ false statements and/or omissions, GDS American Depositary Shares (”ADSs”) traded at artificially inflated prices of more than $45 per share during the Class Period.

Then on July 31, 2018, Blue Orca Capital released a report alleging that “GDS [was] borrowing crippling amounts of debt to enrich insiders by acquiring data centers from undisclosed related parties which [we]re not nearly as valuable as the Company [had] claim[ed].  We believe that since becoming a public Company, GDS has borrowed recklessly to siphon off at least RMB 696 million to insiders by inflating the purchase price of undisclosed related party acquisitions.”  Following the release of this report, the price of the Company’s ADSs fell $12.92 per share, or more than 37%, to close at $21.83 per share on July 31, 2018.

Class Period: November 2, 2016 - July 31, 2018
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