Every reporter Cai Ding Wang Xingping and every editor Cai Ding Wang Lina
Net Red e-commerce first share such as Hanhan in Nasdaq listing for six months has been controversial.
Recently, Ruhan has put things on the table again. A number of law firms in the United States have filed a collective lawsuit against the company recently, claiming that if there are false, misleading statements or undisclosed information in the prospectus of Hanyu Holdings (Nasdaq Securities Code: RUHN), the stock price of Hanyu Holdings has fallen all the way after its IPO, harming the interests of investors.
In response, the company said that many law firms, under the banner of so-called investigation, are actually distorting the facts in order to obtain part of the settlement from listed companies as a way to make money.
Collective Litigation in the United States: Legitimate Compliance of Disclosure of Information
According to a press release released by Bernstein Liebhard, a well-known law firm in the United States, five U.S. law firms, including Kaplan Fox & Kilsheimer LLP, Bernstein Liebhard LLP, Block & Leviton LLP, Bernstein Liebhard LLP and Glancy Prongay & Murray LLP, issued statements Wednesday (October 9) in East Time, saying that representatives purchased them between March 31 and October 7, 2019. If the investor who holds the American Depository Document initiates a class action, the company is investigated and the claim is sought. At present, the class action has been submitted to the District Court of East New York for alleged violation of the Securities Act of 1933.
Bernstein Liebhard Law states that if the prospectus contains false and/or misleading statements and/or fails to disclose relevant information:
Second, in the IPO, the number of Keyopinion leaders (KOL) declined by nearly 44%.
Third, as a result, the companys net income from the full-service sector has declined by 46%.
In addition, the defendants statements about his business, operations and prospects were grossly false and misleading at all relevant times, and lacked a reasonable basis. Since the IPO, due to the omission of disclosure of important adverse facts in Ruhans prospectus, the depositary receipt of Ruhan has been substantially lower than its IPO price, causing harm to shareholders.
Since 1993, Bernstein Liebhard has recovered more than $3.5 billion in losses for its clients. In addition to representing individual investors, in order to monitor assets, the law was hired by some of the largest public and private pension funds in the United States and sued on their behalf. As a result of winning hundreds of lawsuits and collective lawsuits, the law firm has been included in the Plaintiff Hot List of the American Journal of Law for 13 consecutive times.
Reporters from the Daily Economic News (Nbdnews) noted that in the past month, more than 10 law firms in the United States have announced that they will initiate collective lawsuits on behalf of Ruhan controlling shareholders.
In response to allegations of U.S. law, the person in charge of holding company responded to Daily Economic News (Nbdnews) by saying: All information disclosed by the company is all right and fully compliant. At present, STB Law Office of the companys U.S. attorney assists the company in dealing with such matters. Everything in the companys daily operation is normal and unaffected.
At the same time, the person in charge of Ruhan Holdings also said: This is a business model in the United States. Many law firms, under the banner of so-called investigation, are actually distorting the facts in order to obtain part of the settlement from listed companies, so as to make money. Therefore, there are a large number of small law firms specializing in such businesses in the United States.
Was Wang Sicong right? Ruhans share price fell half a year
On April 3, 2019, Nasdaq-listed Ruhan Holdings opened at $11.5 per share, falling below the offering price of $12.5 per share at the opening, with its share price continuing to fall, closing down 37.2 per cent and its market value falling to $649 million. Many investors lament: the first time to see a break of 15% of new shares, hit the first day of the new plunge of 30%, rare in years... From the IPO to the close of October 11, Ruhans share price has halved from its offering price.
As early as April 2016, Ruhan Holdings Limited Kerry Eyre was listed on the new third board, and then delisted from the new third board in early 2018 to start the journey to the United States. In early March 2019, Ruhan submitted an IPO prospectus to the US Securities and Exchange Commission (SEC) for listing on Nasdaq.
The Daily Economic News (Nbdnews) has previously reported that Ruhans business model, in short, mainly generates revenue in two ways:
First, product sales, online store sales of their own design products, currently mainly including womens wear, cosmetics, shoes and handbags. Second, services: KOL sales and advertising services to brands, online retailers and other businesses.
It is also for this reason that the three core businesses of Ruhan are: Red Man Brokerage, Marketing Promotion and E-commerce.
Picture of Ruhan Official Website
According to the prospectus, in the ownership structure of Ruhan, CEO Feng Min holds 27.51%; net Hongzhang Dayi holds 15%; director and general manager Sun Lei holds 14.59%; director Shen Chao holds 6.67%; Saifu and Alibaba both hold 8.56%; Junlian Capital holds 8.54%.
Because it is not satisfied with Zhang Dayis single IP, Ruhan Holdings has found more potential stocks for cultivation after its establishment. According to the prospectus, as of the end of last year, there were 113 signatories (KOL, opinion leaders), 148.4 million fans and 91 self-owned online stores (39% of retail users).
Screenshot of Zhang Dayis Weibo
Despite incubating hundreds of netizens, Zhang Dayi is still the absolute top card. According to the prospectus, the top KOL contributed 60.7%, 65.2% and 55.2% of GMV in fiscal year 2017, fiscal year 2018 and fiscal year 2019 respectively. Among them, there were 3 top KOLs in FY2018 and FY2019, Zhang Dayi ranked first, and the number of microblog fans was 6.65 million more than Dajin, which ranked second. Zhang Dayi has the right to make a net profit of 49% from Ruhans online store in her name.
Photo source: Ruhan prospectus
In addition to the top 10 KOL, Ruhans remaining 103 signatories contributed about 670 million yuan of GMV in nine months. The average contribution of GMV per person per month is about 720,000 yuan.
The prospectus shows a net loss of 40.1 million yuan in fiscal year 2017 and 90 million yuan (about 13.1 million dollars) in fiscal year 2018. The net loss of RMB 57.5 million (about US$8.4 million) in the three fiscal quarters before fiscal year 2019 was RMB 26.1 million in the same period last year.
Less than a week after Ruhan went public, Wang Sicong also analyzed Ruhans business model in the circle of friends. He said that Ruhans three major problems include: first, the loss caused by the high proportion of marketing expenses; secondly, the non-reproducibility of Internet Red; and most importantly, Ruhans model has not been proved successful, nor has it proved that it can cultivate a new KOL.
Photo Source: Screenshots of Wang Sicongs Friends Circle
The following is the original text of Wang Sicongs circle of friends:
Loss of 1.0 billion (gross profit of 300 million in 2018 but performance cost of 100 million yuan, marketing cost of 146 million yuan, comprehensive management cost of 130 million yuan, plus other business income of 710,000 yuan, resulting in a total operating loss of 72.35 million yuan. Income is there, but the money spent is also inexplicable. Especially nearly 150 million marketing expenses are puzzling. Whats the meaning of KOL when it spends so much marketing expenses? What will happen if it is stopped?
2. Non-replicability (signing more than 100 net bonuses, but Zhang Dayi accounted for 50.8%, 52.4% and 53.5% of revenue in fiscal year 2017, fiscal year 2018 and fiscal year 2019 respectively). What an unhealthy proportion.
3. Ruhans online red incubation, online red e-commerce, online Red marketing model has not proved successful, nor has it proved that they can cultivate a new KOL.
(Cover image from Photo Network)
Source: Daily Economic News Responsible Editor: Yao Liwei_NT6056