MANHATTAN (CN) - A company that billed itself as the largest e-payment enabler in Southeast Asia failed to deliver third-quarter financial results last week, sending shares into a tailspin, a federal class action alleges.
MOL Global, a Cayman Islands-based LLC, sold 13.5 million American Depository Shares (ADS) pursuant to its initial public offering last month, opening NASDAQ trading on Oct. 9, according to the complaint filed Monday.
The company provides payment solutions for online goods and services in Southeast Asia, and touted its physical distribution network of more than 970,000 locations in 13 countries across four continents, the complaint states.
Lead plaintiff Michael Freedman says Deutsche Bank recommended MOL Global stock as a "buy" on Nov. 20, one day before the company was scheduled to release its third-quarter financial results.
After the market closed that day, however, "little more than forty days after the company's IPO, MOLG announced 'that the company has rescheduled the date it plans to release its third quarter 2014 financial results to Wednesday, December 3, 2014, before market opens,'" the complaint states.
"Shockingly, the company also announced that the CFO had abruptly resigned 'for personal reasons," the complaint states.
Freedman says the news caused MOLG stock to suffer a "precipitous decline," and shareholders incurred "significant losses."
Deutsche Bank, which assisted in MOL Global's IPO, described "MOL's sudden announcement as 'potentially ominous" on Nov. 21, the complaint states.
Freedman notes that MOLG shares closed on Nov. 21 at a 54 percent drop from the day before.
"This represented a 67% decline in MOLG's ADS price from the IPO price of $12.50," the complaint states.
By the time NASDAQ halted trading in the company on Nov. 24, pending MOL Global's release of "additional information," its shares were trading at "$4.09 per ADS," according to the complaint.
Freedman blames MOLG for "grossly overstat[ing] its financial results in the registration statement."
In addition to overstating revenue and profit, MOLG concealed that "its actual business model could not sustain the growth trends described in the offering documents," the complaint states.
At "MOLG's primary product is MOLPoints micropayment system, which sells payment credits that can be used by consumers to purchase online game credits and other digital content, including Facebook Game Cards."
In addition to MMOG.asia, an online games portal, the company "also operates MOLReloads, a ... network that distributes prepaid mobile airtime and digital content; [and] MOLPay, a payments solutions for online merchants," the complaint states.
Founded in 2000, MOLG had seen "year over year, and quarter over quarter" of improvement prior to the IPO, Freedman claims.
"Profit from operations reportedly increased 96.6% to MR25.4 million for 2013 from MYR12.9 million for 2012," the complaint states, abbreviating the Malaysian ringgit, which today is worth 30 cents of a U.S. dollar.
Freedman seeks damages for violations of the Securities Act and the Securities Exchange Act.
Defendants include MOL Global and its underwriters Citigroup Global Markets Inc., Deutsche Bank Securities Inc., UBS Securities LLC and CIMB Securities (Singapore) PTE Ltd.
MOLG chief executive officer Ganesh Kumar Bangah and seven other current or former MOLG officers are also named as defendants.
The class is represented by Jeremy Lieberman with Pomerantz LLP.
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