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Thursday, March 28, 2024 | Back issues
Courthouse News Service Courthouse News Service

Chinese Website Faces Investor Class Action

MANHATTAN (CN) - Internet broadcaster Youku Tudou takes its name from the Chinese phrase for "what's best and what's cool," but the Beijing-based company's accounting practices do not live up to its motto, a federal class action alleges.

Rashid Jahm claims to represent "hundreds of thousands" of people who bought Youku stock between May 15, 2013, and March 19, 2015. The April 14 federal securities fraud complaint also names as defendants Youku executives Victor Wing Cheung Koo and Michael Ge Xu.

Youku Tudou formed three years ago through a more than $1 billion merger that created a company controlling about a third of China's video-advertising market, The New York Times reported.

The timeline of the class-action complaint begins a little more than a year after this acquisition, with the company's announcing of its first-quarter financial results from 2013.

Since that time, Youku Tudou put out multiple statements revealed to have been "materially false and misleading" when the company first disclosed a Securities and Exchange Commission investigation on March 19, 2015, the lawsuit claims.

The next day, the stock price "plummeted" 9 percent, from $15.15 to $13.50, according to the complaint.

"The potentially improper accounting as questioned by the SEC has resulted in a loss of over $365 million in market value to Youku investors," the complaint states.

Only the company's "fraud" is to blame for the dip, Jahm claims.

"The decline in Youku's share price was a direct result of the nature and extent of defendants' fraud finally being revealed to investors and the market," his complaint states. "The timing and magnitude of the common stock price decline negates any inference that the loss suffered by plaintiff and other members of the class was caused by changed market conditions, macroeconomic or industry factors or company-specific facts unrelated to the defendants' fraudulent conduct."

The class seeks damages for two alleged securities violations.

It is represented by Matthew Guiney of Walf Haldenstein Adler Freeman & Herz LLP.

Youku Tudou did not immediately respond to a request for comment.

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