NEW YORK, March 31, 2021 /PRNewswire/ -- Roche Freedman
LLP, a national shareholder rights litigation firm, represents Lead
Plaintiff James Pappas in the federal securities class action,
In re Qutoutiao, Inc. Securities
Litigation, Case No. 1:20-cv-06707 (S.D.N.Y.).
Investors who purchased American Depository Shares ("ADSs") of
Qutoutiao, Inc. ("QTT") in its September
2018 initial public offering ("IPO") or April 2019 secondary public offering ("SPO") are
encouraged to contact the firm before May
10, 2021.
Mr. Pappas filed a Consolidated Amended Class Action Complaint
for violations of the federal securities laws in this
case on behalf of anyone who (a) purchased or otherwise acquired
QTT ADSs pursuant or traceable to its September 2018 IPO; (b) purchased or otherwise
acquired QTT ADSs pursuant or traceable its April 2019 SPO; and/or (c) purchased or otherwise
acquired QTT securities between September 14, 2018 and
December 16, 2020, both dates inclusive (the "Class
Period").
QTT offers a mobile application called Qutoutiao, meaning "fun
headlines" in Chinese, that provides a customized feed to its users
of aggregated articles and short videos from professional media and
freelancers. On September 14, 2018,
QTT issued its IPO and sold 13.8 million ADSs at a price of
$7.00 per share. Then on
April 5, 2019, QTT issued its SPO and
sold 3.3 million ADSs at $10 per share.
The class action alleges that Defendants violated federal
securities laws by issuing materially false and misleading
information in QTT's Offering Documents and in public statements
during the Class Period. Specifically, the Amended Complaint
alleges that Defendants made false and misleading statements that:
(i) mischaracterized QTT's targeting of users in Tier-3 and Tier-4
cities as due to their having more time and disposable income to
spend on the internet when in fact, advertisers wanted to run
non-compliant ads in those cities because regulators were more
lenient and users were less aware of their rights in those cities;
(ii) inaccurately described the benefits of, and reasons for,
replacing QTT's third-party advertising agent, Baidu, with Dianguan
by not disclosing that the change allowed QTT to avoid the
oversight Baidu had been providing which had prevented it from
selling more non-compliant ads; (iii) misleadingly touted QTT's
advertising revenue without disclosing that a significant number of
ads whose claims could not be substantiated and thus were
considered false advertisements under applicable regulations or
provided links to illegal online gambling platforms; (iv)
misleadingly touted QTT's 2017 and 2018 revenue without disclosing
that the aggregate revenue of its subsidiaries reporting in
China was at least RMB 187.6 million and RMB
620 million less, respectively; (v) negligently promoted
QTT's ability to monetize user traffic without disclosing that such
monetization required it to set up separate teams with different
processes and procedures for qualified versus unqualified
advertisers in order to sell non-compliant ads; and (vi) failed to
adequately warn investors that certain "Risk Factors" listed in the
Offering Documents had already materialized at the time of the
Offerings as QTT was violating the applicable advertising laws and
regulations by running non-compliant ads so QTT would inevitably
face increasing regulatory scrutiny, reputational harm and
decreased revenue when the truth became known.
The truth was partially revealed on December 10, 2019 through a report published
by Wolfpack Research entitled "QTT: Fake Revenue, Non-Existent
Cash, Undisclosed Related Parties." The Wolfpack Report
alleged, among other things, that (1) QTT's "revenue is
generated solely by the accounting department" so only RMB 798 million of its RMB
3.02 billion reported revenue was actual revenue and (2) QTT
"exists to enrich its Founder and CEO, Eric
Tan, and promote his VC fund's other ventures by creating
its own in-house 'advertising agent' in order to direct significant
amounts of ad traffic to undisclosed related parties owned by
Tan" and remove restrictions that had been preventing QTT from
doing so, thereby "perpetrat[ing] the unmitigated ad fraud
that [Wolfpack] observed in [its] sample." On this news, QTT's
share price fell 4% to close at $2.86 per share on December 11, 2019, on heavy trading volume.
Then on July 15, 2020, the truth
about QTT's revenue was further revealed when China's state-controlled broadcaster,
CCTV, aired its annual show documenting the use of
improper ads on QTT's platform (the "CCTV Exposé"). The
CCTV Exposé resulted in the temporary suspension of the QTT
App from Chinese app stores. On these revelations, the
price of QTT's ADSs fell more than 24%. Further, the CCTV Exposé
forced QTT to finally come clean and enact remedial measures
to halt its illegal practices.
As a result, on December 16, 2020, QTT had to report
that its revenue for the third quarter of 2020 had plummeted,
dropping 19.7% year-over-year with a remarkable 23.1% drop in
advertising revenue. The year-over-year growth justifying
investors' interest was gone, replaced with a revenue decline. As
QTT conceded, this significant revenue drop, which caused the ADS
price to fall by another 24%, was due to the "remedial measures
undertaken by [QTT] in response to the report by [CCTV] on certain
advertisements." Simply put, QTT had been caught with its hand in
the cookie jar. And the stark drop in revenue following QTT's
corrective actions unequivocally confirms that—contrary to its
Offering Documents and other Class Period statements—the use of
nonconforming advertisements had been central to QTT's plan for
revenue growth. Defendants' false and material misstatements caused
a significant decline in the value of QTT's securities and resulted
in millions of dollars in losses to investors.
Roche Freedman LLP is actively investigating the wrongdoings
alleged in the Amended Complaint. If you believe you have suffered
damages as a result of Defendants violations of the federal
securities laws or have further inquiries regarding this
matter, please contact Vel Freedman
(vel@rcfllp.com) at (305) 306-9211, Ivy T. Ngo (Ingo@rcfllp.com) at (646)
876-3568, or Constantine
Economides (Ceconomides@rcfllp.com) at (305)
851-5997.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/roche-freedman-provides-class-action-update-to-investors-of-qutoutiao-inc-301260050.html
SOURCE Roche Freedman LLP