Qutoutiao Inc. Class Action Lawsuit
- Company Name
- Qutoutiao Inc.
- Stock Symbol
- Class Period
- September 14, 2018 to July 15, 2020
- Southern District of New York
The Qutoutiao Inc. class action lawsuit seeks to represent purchasers of (1) Qutoutiao Inc. (NASDAQ:QTT) American Depositary Shares (“ADSs”) pursuant and/or traceable to the registration statement and prospectus (collectively, the “Registration Statement”) issued in connection with Qutoutiao’s September 2018 initial public offering (“IPO”); and/or (2) purchasers of Qutoutiao securities between September 14, 2018 and July 15, 2020, inclusive (the “Class Period”). The Qutoutiao Inc. class action lawsuit pursues claims against Qutoutiao, certain of its officers and directors, and the underwriters of its IPO for violations of the Securities Act of 1933 and/or the Securities Exchange Act of 1934.. The Qutoutiao class action lawsuit was commenced on August 20, 2020 in the Southern District of New York and is captioned Burnham v. Qutoutiao Inc., No. 20-cv-06707.
Qutoutiao (which means “fun headlines” in Chinese) offers a mobile application of the same name that aggregates articles and short videos from professional media and freelancers and presents customized feeds to users. In September 2018, Qutoutiao completed its IPO, selling 13.8 million ADSs at a price of $7.00 per share. Qutoutiao received net proceeds of approximately $85.8 million from the IPO.
The Qutoutiao class action lawsuit alleges that in the Registration Statement and during the Class Period, defendants made false and/or misleading statements or failed to disclose that: (1) Qutoutiao replaced its advertising agent with a related party, thereby bypassing third-party oversight of the content and quality of its advertisements; (2) Qutoutiao placed advertisements on its mobile app for products whose claims could not be substantiated and thus were considered false advertisements under applicable regulations; (3) as a result, Qutoutiao would face increasing regulatory scrutiny and reputational harm; (4) as a result, Qutoutiao’s advertising revenue was reasonably likely to decline; and (5) as a result of the foregoing, defendants’ positive statements about Qutoutiao’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.
On December 10, 2019, Wolfpack Research published a report alleging, among other things, that Qutoutiao had overstated its revenues by recording non-existent advances from advertising customers. Moreover, the report alleged that Qutoutiao replaced its third-party advertising agent with a related party, thereby bypassing the agent’s oversight and allowing Qutoutiao to “perpetrate the unmitigated ad fraud that [Wolfpack] observed in [its] sample.” On this news, Qutoutiao’s share price fell nearly 4%.
Then, on July 15, 2020, hosts of a consumer rights gala stated that Qutoutiao had allowed ads on its platform promoting exaggerated or impossible claims from weight-loss products. For example, one such ad offered free weight-loss products valued at $14,300 that would help users lose more than 30 pounds a month. On this news, Qutoutiao’s share price fell 23%.
Finally, on July 17, 2020, Chinese media reported that Qutoutiao’s app had been removed from domestic Android app stores.
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