PPDAI Group Inc.
- Company Name
- PPDAI Group Inc.
- Stock Symbol
- Class Period
- Shares pursuant to the Company’s November 10, 2017 initial public offering
- Motion Deadline
- January 25, 2019
- Eastern District of New York
The complaint charges PPDAI, certain of its directors and the underwriters of its November 2017 initial public offering (“IPO”) of American Depositary Shares (“ADSs”) with violations of the Securities Act of 1933. PPDAI is an online consumer finance marketplace with primary operations in China. The Company, launched in 2007, is the first online consumer finance marketplace in China connecting borrowers and investors. The Company provides a proprietary platform featuring an automated loan transaction process. As of June 30, 2018, the Company claimed to have over 78 million cumulative registered users.
The Company filed a confidential draft registration statement with the SEC on Form F-1 on January 20, 2017. The Form F-1 incorporated several documents, including a registration statement on Form F-6 filed pursuant Rule 424(b)(4), to be used for the impending IPO following a series of amendments in response to SEC comments (the “Registration Statement”). The SEC declared the Registration Statement effective on November 9, 2017. Defendants priced the IPO at $13 per share and filed a final prospectus for the IPO on November 13, 2017 (the “Prospectus”). The Prospectus forms part of the Registration Statement (together the “Offering Documents”). On November 14, 2017, PPDAI completed the IPO, which generated $221 million in gross proceeds for defendants.
The complaint alleges that the Offering Documents for the IPO contained untrue statements of material fact and omitted to state material facts both required by governing regulations and necessary to make the statements made not misleading. Specifically, the Offering Documents contained false and misleading statements and/or failed to disclose that: (1) PPDAI was engaged in predatory lending practices that saddled subprime borrowers and those with poor or limited credit histories with high interest rate debt they could not repay; (2) many of PPDAI’s customers were using loans from PPDAI to repay existing loans they otherwise could not afford to repay, thereby inflating PPDAI’s revenues and active borrower numbers and increasing the likelihood of defaults; (3) PPDAI was experiencing increasing delinquency rates, which were negatively affecting PPDAI’s reserves; (4) PPDAI’s purported “rapid growth” in the number and amount of loans had materially dropped off; (5) PPDAI was providing online loans to college students despite a government ban on the practice; (6) PPDAI was engaged in overly aggressive and improper collection practices; and (7) as a result of its improper lending, underwriting, and collection practices, PPDAI was subject to heightened risk of adverse actions by Chinese regulators.
With these misrepresentations and omissions in the Offering Documents, the IPO went forward in November 2017 and was extremely lucrative for defendants, who raised $221 million in gross proceeds. PPDAI ADSs were sold at $13 per share in the IPO, but since the disclosure of the material adverse facts that were omitted from the Offering Documents, the price of PPDAI’s ADSs has declined. By the end of December 2017, the ADSs were trading at approximately $7 per share, a roughly 46% decline from the offering price, and the price has continued to be depressed, with the ADSs current trading below $6 per share.