iQIYI, Inc. Class Action Lawsuit

Case Summary

Company Name
iQIYI, Inc.
Stock Symbol
Class Period
March 29, 2018 to April 7, 2020, including purchasers of ADSs pursuant to the March 29, 2018 initial public offering
Eastern District of New York

The iQIYI, Inc. securities class action lawsuit charges iQIYI, Inc. and certain of its officers with violations of the Securities Exchange Act of 1934 and seeks to represent purchasers of iQIYI securities between March 29, 2018 and April 7, 2020 (the “Class Period”).  The iQIYI securities class action lawsuit was commenced on April 16, 2020 in the Eastern District of New York and is captioned Lee v. iQIYI, Inc., No. 20-cv-01830.

iQIYI provides online entertainment services under the iQIYI brand in China.  It operates a platform that provides a collection of internet video content, including professionally produced and self-produced content.  iQIYI also provides membership, content distribution, online advertising, live broadcasting, and online gaming and literature services.

On February 27, 2018, iQIYI filed a Registration Statement on Form F-1 with the U.S. Securities and Exchange Commission, which, along with subsequent amendments and a Prospectus filed on March 29, 2018, would be used for iQIYI’s initial public offering (“IPO”) of approximately 125 million American Depositary Shares (“ADSs”) at $18.00 per share.  iQIYI raised approximately $2.25 billion in the IPO. 

The iQIYI securities class action lawsuit alleges that, in the offering documents for the IPO and throughout the Class Period, defendants made false and misleading statements and/or failed to disclose that iQIYI had inflated its revenue figures and user numbers and that it was inflating its expenses to cover up other fraud.  As a result of this information being withheld from the market, iQIYI securities traded at artificially inflated prices during the Class Period, with the price of iQIYI’s ADSs reaching a high of more than $44 per share.

Then on April 7, 2020, Wolfpack Research released a report detailing, among other things, how iQIYI had misled investors and failed to disclose pertinent information generally and in its Registration Statement for the IPO.  The report stated that iQIYI had overstated its user numbers and inflated its revenues, that iQIYI had inflated expenses and the price of assets to conceal its revenue inflation, and that iQIYI’s misleading financial reporting had created the appearance of a cash generative company.  According to the report: “Our research shows us that iQIYI, Inc. (‘IQ’) was committing fraud well before its IPO in 2018 and has continued to do so ever since.  Like so many other China-based companies who IPO with inflated numbers, IQ is unable to legitimately grow their business enough to true up their financial statements.  We estimate IQ inflated its 2019 revenue by approximately RMB 8-13 billion, or 27%-44%.  IQ does this by overstating its user numbers by approximately 42%-60%.  Then, IQ 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.”  On this news, the price of iQIYI ADSs fell $0.99 per share over two trading day, or 5.6%, to close at $16.51 per share on April 8, 2020.

Robbins Geller Rudman & Dowd LLP is one of the world’s leading law firms representing investors in securities class action litigation.  With 200 lawyers in 9 offices, Robbins Geller has obtained many of the largest securities class action recoveries in history.  For seven consecutive years, ISS Securities Class Action Services has ranked the Firm in its annual SCAS Top 50 Report as one of the top law firms in the world in both amount recovered for shareholders and total number of class action settlements.  Robbins Geller attorneys have helped shape the securities laws and have recovered tens of billions of dollars on behalf of aggrieved victims.  Beyond securing financial recoveries for defrauded investors, Robbins Geller also specializes in implementing corporate governance reforms, helping to improve the financial markets for investors worldwide.  Robbins Geller attorneys are consistently recognized by courts, professional organizations and the media as leading lawyers in the industry.

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