I knew this. Why didn't I tell you then? Well, if you read two of my blogposts carefully, you would have got the message: don't touch it!
Shareholders sue China's Giant Interactive
SHANGHAI, Nov 28 (Reuters) - Shareholders are suing Giant Interactive Group Inc (GA: Quote, Profile, Research), saying China's third-largest online game operator failed to disclose a drop in users for a popular game before its recent share listing.
Two firms, Abraham Fruchter & Twersky LLP and Coughlin Stoia Geller Rudman & Robbins LLP, announced their actions in similarly worded statements released after U.S. markets closed on Tuesday.
The allegations surround Giant's popular game ZT Online, and a downturn for the title in the three months through September, before the company's November 1 initial public offering.
"The complaint alleges that the registration statement and prospectus (before the IPO) failed to disclose that the company had experienced a decline in average concurrent users and peak concurrent users for the third quarter of 2007 due to a significant rule change for ZT Online," the statements from both law firms said.
It said that following the disclosure of the drop in users, Giant's share price fell by a quarter. It was not clear how many shareholders were participating in the class action lawsuit. Article continued...
Main points of pervious posts:
- Quote from Giant Interactive comes to the NYSE entry on Thursday, October 18, 2007
First, I want you to remember to the story of 51jobs Inc. (NASDAQ:JOBS). As the following chart suggests, after the IPO in the fall of 2004 stock price rocketed from the $20 to the $60 range in less than four months. And then news broke out: the company is not what is said it was. JOBS portrayed herself to the investment community similar to Monster.com, the U.S. job search site online. Imagine, 1.3 billion Chinese looking for jobs... This stock is a BUY... But things turned sour for many of us when it turned out that the company is deriving most of its revenues from PRINT advertisement rather than online job placement. It's like Yellow Pages, if I wanted to use an English terminology. And growth prospect for such product is far from what's been expected. Lawsuits, resignation etc followed... Long story short, stock price plummeted to $12.70 and has not recovered ever since.
- Quote from How to measure the quality of Chinese IPOS? entry on Wednesday, November 07, 2007
I have been following Chinese ADRs (U.S. listed Chinese companies) for a long time to realize a change in the dynamics of new IPOs. There has been a lot of fanfare about Giant Interactive's NYSE IPO (ticker GA) on November 1, 2007, yet as the table following the two charts below reveals the stock has lost -0.1% on the debut day and is down -4.6% ever since. (Related story: Giant Interactive comes to the NYSE. What to expect and more importantly what to look out for. Another entry: Background of Giant's founder and CEO.)
As the following charts and table revels, five of the latest eight IPOs of Chinese companies (in grey background) put investors in the red. Not just the first day - as many would think is the best time to buy and quit - but also if you just sat tight since the IPO. For numbers, look up the last two columns of the table below. What went wrong? It seems as if the latest IPOs are of low quality.
Hope you don't get me wrong by pointing out some of the bad experiences with Chinese companies. I really believe Chinese equities offer unparalleled investment opportunities. But!!! You have to be able to separate darlings from the dogs. I've been around long enough to know that not all Chinese companies are golden.
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