- Company Name
- Pinduoduo Inc.
- Stock Symbol
- Class Period
- Purchasers of Pinduoduo American Depositary Shares between July 26, 2018 and July 31, 2018 including purchasers pursuant and/or traceable to the July 26, 2018 initial public offering
- Motion Deadline
- October 20, 2018
- Southern District of New York
The complaint charges Pinduoduo and certain of its officers and directors with violations of the Securities Exchange Act of 1934 and Securities Act of 1933. Pinduoduo is an e-commerce platform allowing users to participate in group buying deals. The Company was founded in 2015 and is based in Shanghai, China. On or around July 26, 2018, Pinduoduo completed its initial public offering (“IPO”) of 85.6 million American Depositary Shares (“ADSs”), which were offered at $19.00 per share but traded as high as $26.70 per share following the IPO, raising $1.63 billion.
The complaint alleges the Registration Statement issued in connection with Pinduoduo’s IPO contained materially false and misleading statements regarding the Company’s business and compliance policies. Specifically, defendants made false and misleading statements and/or failed to disclose that Pinduoduo’s controls were ineffective to prevent third-party vendors from selling counterfeit goods on the Company’s online platform, and consequently, Pinduoduo’s revenues and the number of active merchants using its platform were traceable in part to unlawful conduct and thus were unsustainable.
On July 31, 2018 and August 1, 2018, media outlets reported that China’s State Administration for Market Regulation was investigating Pinduoduo after reports that third-party vendors were selling counterfeit goods on the Company’s group-discounting website. According to Reuters, the State Administration said on its website that “it will interview staff at the three-year-old firm and deal seriously with any illegal practices, such as the failure to remove listings featuring counterfeit goods.” On this news, the price of Pinduoduo ADSs fell $2.28 per share, or 10%, to close at $20.31 per share on August 1, 2018. At the time of the filing of the complaint, Pinduoduo’s ADSs were trading below the IPO price of $19.00 per share.