Law Firms Go After Baidu, iQiyi After SEC Fraud Probe
U.S. investors' rights litigators wasted no time after the recently announced probe by the SEC into Chinese streaming platform iQiyi Inc. (Nasdaq: IQ). A number of firms, including Rosen Law Firm and Bragar Eagel & Squire, P.C., are now going after iQiyi's parent, Baidu (Nasdaq: BIDU).
China's dominant search engine, Baidu is also dealing with another recent class action lawsuit. In April and May, U.S. law firms filed against the giant on behalf of its investors alleging that during the period from March 16, 2019 to April 7, 2020, they suffered a 50% stock drop due to the actions of the company.
Specifically, Barbuto & Johansson, P.A., and other litigators, argued that Baidu's management's failed "to disclose to investors that Baidu's feed services were not in compliance with Chinese regulatory standards and that such noncompliance subjected the Company to a heightened risk of regulatory enforcement, including the removal or suspension of certain of Baidu's services and products, which would adversely impact marketing revenues."
Further, "Baidu reported that it had accused a former executive, the Vice President of Finance, to the police for corruption. The company did not disclose the nature of this corruption."
The suit occurred after China's internet watchdog, the Cyberspace Administration, forced Baidu to suspend some of its mobile app channels in early April claimed it failed to implement "strict" content review on its feed channels.
Now, Baidu has more trouble.
Last week, Disney-wannabe iQiyi disclosed that it's under investigation by the Securities and Exchange Commission. The probe followed allegations by Wolfpack Research and Muddy Waters that iQiyi had significantly inflated its users and revenue as early as before its 2018 IPO and continued to do so after it went public. Nevermind the Year of the Rat, after the Luckin Coffee scandal, 2020 has become the Year of the Fraud.
Rosen Law wrote in a press release Wednesday: "According to the lawsuit, defendants throughout the Class Period made false and/or misleading statements and/or failed to disclose that: (1) Baidu misrepresented the financial and business condition of iQIYI; (2) iQIYI had inadequate controls; and (3) as a result, defendants' public statements were materially false and/or misleading at all relevant times. According to the suit, these true details were disclosed by a market research firm."
Then, further in the release: "A class action lawsuit has already been filed."
Baidu may be wishing it had already sold off its trouble child to Chinese tech giant Tencent Holdings (HKEX: 0700; OTC: TCEHY) as the latter so offered.
Naturally, iQiyi is also facing legal trouble beyond the SEC probe. Pomerantz LLP issued a statement Thursday saying it is investigating into the Chinese streaming platform after its stock dropped 11% on news of the SEC investigation.
Despite the troubles and a dip to red territory in early trading Thursday, BIDU stock ended in the green, at $123.48 per American depositary share, up 77 cents.
IQ shares ended 8 cents higher Thursday, at $18.91 apiece, but turned red in after-hours trading. Both BIDU and IQ closed in the red on Wednesday after the lawsuits were set in motion.