NEW YORK, May 11, 2020 (GLOBE NEWSWIRE) -- Pomerantz LLP announces that a class action lawsuit has been filed against DouYu International Holdings Limited (“DouYu” or the “Company”) (NASDAQ: DOYU) and certain of its officers. The class action, filed in United States District Court for the Central District of California, and indexed under 20-cv-03914, is on behalf of a class consisting of all persons and entities other than Defendants who purchased or otherwise acquired DouYu American Depositary Shares (“ADSs”) pursuant and/or traceable to the Company’s Registration Statement issued in connection with the Company’s July 16, 2019, initial public offering (the “IPO” or the “Offering”), seeking to recover compensable damages caused by Defendants’ violations of the Securities Act of 1933 (the “Securities Act”) (the “Class”).
If you are a shareholder who purchased DouYu ADSs securities pursuant and/or traceable to the Company’s Registration Statement issued in connection with the Company’s July 16, 2019, IPO, you have until May 26, 2020, to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlawfirm.com. To discuss this action, contact Robert S. Willoughby at rswilloughby@pomlaw.com or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 9980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
[Click here for information about joining the class action]
DouYu is purportedly one of the People’s Republic of China’s (“PRC” or “China”) top two live-streaming video-game platforms. Operating on personal computer (“PC”) and mobile applications, DouYu enables users to enjoy immersive and interactive games and live streaming of entertainment.
April 22, 2019, DouYu filed a registration statement with the SEC on Form F-l, which, after several amendments, was declared effective on July 16, 2019 (the “Registration Statement”). Thereafter, on July 18, 2019, the Company filed a prospectus for the IPO on Form 424B4, which incorporated and formed part of the Registration Statement (collectively, the “Offering Documents”)
The Registration Statement was used to sell to the investing public more than 67.3 million DouYu ADSs at $11.50 per ADS. Defendants generated more than $774 million in gross offering proceeds from their sale of the Company’s securities in the IPO.
The Complaint alleges that the Offering Documents used to effectuate DouYu’s IPO and secure this sum for Defendants from Plaintiff and the Class (defined below) were negligently prepared and, as a result, contained untrue statements of material facts or omitted to state other facts necessary to make the statements made therein not misleading. Specifically, the Offering Documents failed to disclose that prior to the IPO: (i) DouYu’s risks related to its top streamers had materialized, including that (a) a top streamer was actively misrepresenting herself on DouYu’s platform, and (b) the costs associated with retaining top streamers was swelling; (ii) DouYu did not ensure that all of its products were fully compliant with current regulatory requirements before those products became available online; and (iii) key interactive features of DouYu’s “lucky draw” were non-compliant with current regulatory requirements, requiring DouYu to remove them from operations, which negatively impacted user engagement activity and caused disappointing financial results.
On July 30, 2019, less than two weeks after DouYu’s IPO, BBC News published an article about a Chinese vlogger (known as “Qiao Biluo”), who used a filter to look younger and whose fans were left stunned after a technical glitch during a live-stream revealed her to be a middle-aged woman and not the young glamorous girl DouYu users had been “worship[ing].”
On July 31, 2019, Mic.com also published a story, titled “Popular Chinese DouYu streamer revealed to be much older thanks to livestream glitch” (the “Mic Article”), on the glitch that revealed the true identity of Qiao Biluo whose DouYu users “fawned over the videos and photos that she uploaded . . . which showed a young woman posing, playing games, and talking to the camera.” According to the Mic Article, “the revelation caused a considerable amount of drama, with many of her male subscribers expressing outrage that they had been tricked. They left the stream in droves, unsubscribed from her account, and pulled donations.”
A day later, on August 1, 2019, TechNode, an online information outlet catering to the tech and startup community both inside and outside of China, revealed that DouYu “banned [Qiao Biluo] on Thursday for drumming up the hype surrounding her accidental face reveal”.
TechNode also put the incident in context, revealing that several well-known Chinese live-streamers have been banned for inappropriate behavior in the past, including “Lu Benwei, one of Douyu ’s most popular hosts, [who] was banned from all live-streaming platforms by the country’s top internet regulator, the Cyber Administration of China, for verbally abusing a content creator who accused him of cheating”
The media continued to publish accounts of the Qiao Biluo incident over the next few days, often repeating the fact that the glitch caused her followers to unsubscribe en masse and rescind their gifts.
On July 29, 2019, the day before the incident was first reported, DouYu ADSs closed at $10.08 per ADS. After the market absorbed all this information, on August 6, 2019, DouYu ADSs closed at $7.84 per ADS, or down 22.22%.
On August 11, 2019, Bloomberg published an article from the South China Morning Post, profiling Liu Mou (“Liu”), a top streamer who plays exclusively on DouYu and purportedly contributed as much as 3% of DouYu’s revenues in the second quarter of 2019 alone. In addition to explaining how DouYu lives and dies on virtual gifts from fans, with “[n]inety-one percent of Douyu’s revenue [coming] from virtual gifts” in the previous quarter, the article warned that “the cash burn on marketing and retaining top performers have caused investors to question the business model” (emphasis added). Using Liu as an example, the article noted how “Douyu pay[s] top gamers like Liu at least $4 million a year to retain them exclusively” and gives them half of whatever money was spent on “virtual gifts [bestowed upon them] from followers[.]”
On August 13, 2019, DouYu ADSs closed at $8.84 per ADS, falling from $9.93 per ADS the day before, or nearly 11%, before declining even further to $8.14 per share on August 14, 2019.
TechNode also put the incident in context, revealing that several well-known Chinese live-streamers have been banned for inappropriate behavior in the past, including “Lu Benwei, one of Douyu ’s most popular hosts, [who] was banned from all live-streaming platforms by the country’s top internet regulator, the Cyber Administration of China, for verbally abusing a content creator who accused him of cheating”.
The media continued to publish accounts of the Qiao Biluo incident over the next few days, often repeating the fact that the glitch caused her followers to unsubscribe en masse and rescind their gifts.
On July 29, 2019, the day before the incident was first reported, DouYu ADSs closed at $10.08 per ADS. After the market absorbed all this information, on August 6, 2019, DouYu ADSs closed at $7.84 per ADS, or down 22.22%.
On August 11, 2019, Bloomberg published an article from the South China Morning Post, profiling Liu Mou (“Liu”), a top streamer who plays exclusively on DouYu and purportedly contributed as much as 3% of DouYu’s revenues in the second quarter of 2019 alone. In addition to explaining how DouYu lives and dies on virtual gifts from fans, with “[n]inety-one percent of Douyu’s revenue [coming] from virtual gifts” in the previous quarter, the article warned that “the cash burn on marketing and retaining top performers have caused investors to question the business model”.
On August 13, 2019, DouYu ADSs closed at $8.84 per ADS, falling from $9.93 per ADS the day before, or nearly 11%, before declining even further to $8.14 per share on August 14, 2019.
Then, on October 15, 2019, J.P. Morgan announced in an analyst report that DouYu had temporarily removed its “lucky draw feature in late Aug 2019,” before “reinstat[ing]” it “on Oct 10,” which, according to J.P. Morgan, “will cause its 3Q19 revenue to decline 1.5% QoQ . . . 5% below the low end of the company’s 3Q19 guidance . . . and 7% lower than current Bloomberg consensus” (emphasis added). J.P. Morgan, which characterized the suspension of luck draw features as a “headwind,”
DouYu closed at $7.12 per ADS on October 16, 2019, or 4.69% lower than the previous day’s close of $7.47 per ADS.
On November 27, 2019, DouYu released its third-quarter 2019 financial results. During the question-and-answer portion of the earnings call held the same day, the Company addressed the temporary removal of its “lucky draw” features.
The Company’s ADSs closed at $7.46 per share on November 29, 2019, the next trading day, representing a decline of over 4.8%.
On January 23, 2020, J.P. Morgan released an analyst report commenting on the suspension of interactive features and crediting the Company’s 12% drop in ADS price on January 22, 2020, to investor concerns about “the financial implications of such a broad-based key monetization feature suspension[,]”
In response to all this information, the Company’s ADSs have cratered, trading as low as $6.50 per ADS since going public, representing a decline of over 43% from the Offering price.
The Pomerantz Firm, with offices in New York, Chicago, Los Angeles, and Paris, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, the Pomerantz Firm pioneered the field of securities class actions. Today, more than 80 years later, the Pomerantz Firm continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomerantzlawfirm.com
CONTACT:
Robert S. Willoughby
Pomerantz LLP
rswilloughby@pomlaw.com
