Several leading investor rights law firms have moved to file lawsuits against BlueCity, over allegations that it made false or misleading statements in its IPO documents last year.
The cases were inspired by a class action, which was filed in the Eastern District of New York yesterday. It claims that BlueCity overstated its business prospects, while also failing to disclose that it wasn’t prepared for the additional costs associated with being a publicly-traded company.
Affiliates, executives and directors of BlueCity have been named as defendants in the case, alongside the IPO’s underwriters.
According to Law360, the acting lead plaintiff Junhui Jiang alleged: “As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of BlueCity’s [American depositary shares], plaintiff and other class members have suffered significant losses and damages.”
The proposed lawsuit includes anyone who purchased ADS during the IPO, or purchased ones on the market which could be traced back to the original offering documents.
During the IPO process, BlueCity promoted its strong position in several major international markets, large active user base and history of sustaining continued profitability. It also revealed plans to expand the portfolio, which has so far seen it acquire LESDO and Finka over the past 12 months.
However, its last two earnings reports have documented significant cost increases across the company, including marketing, development and administrative expenses. This resulted in stock dips of over 20% on both occasions and sizeable losses for investors.
BlueCity’s share price has dropped by more than 60% since the beginning of 2021 and around 70% since the close of its first day on the Nasdaq market.
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