(CN) – China-based lending company Qudian Inc. allegedly duped investors into buying into the company’s initial public offering last year through false statements filed with the Securities Exchange Commission.
The class action, filed in California Superior Court in San Mateo County, says Qudian provides online credit products including funds in digital form and other credit products. Qudian raised roughly $900 million in its Oct. 18, 2017 IPO on the New York Stock Exchange. The company’s chief officers and directors, along with several underwriters including Morgan Stanley and Citigroup Global Markets, are named as defendants.
The class alleges that the registration statement and prospectus filed by Qudian was rife with misleading or false information.
“For example, the registration statement stated that Qudian had experienced rapid growth in revenues, net income and active users in the years leading up to the IPO, but failed to disclose that this growth had been fuelled by improper lending, underwriting and collection practices,” the complaint states.
Qudian omitted that it engaged in “predatory” lending practices targeting individuals who were poor or had limited credit histories, also providing loans to college students despite a government ban. In addition, the company allegedly failed to disclose that many customers were using Qudian-provided loans to repay existing loans, which inflated the company’s revenues, number of borrowers, and likelihood of default. The complaint further alleges that the private data of almost one million customers had been leaked to the black market.
By Dec. 12, 2017, Qudian’s share price closed at $13.19, 45% below the $24 IPO price. Investors who purchased Qudian stock based on the registration statement and prospectus seek to rescind and recover the amounts paid for their shares.
The class is represented by Laurence M. Rosen of The Rosen Law Firm, P.A in Los Angeles.