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Chinese real estate firm sued over IPO documents


A putative class-action securities lawsuit was filed Friday against a Chinese real estate firm that had its initial public offering in January, charging it made only an oblique reference to the already raging coronavirus pandemic in its offering documents.

Beijing-based Phoenix Tree Holdings Ltd., a Cayman Islands holding company that leases and manages apartments in 13 cities in China — including Wuhan, where the pandemic originated — raised net proceeds of $128.4 million from its sale of American Depository Shares on Jan. 22, according to the lawsuit filed in U.S. District Court in New York against the company, its officers and directors, IPO underwriters and others. The lawsuit, Katherine Wandel v. Jin Gao et al., was originally discussed in the D&O Diary blog.

Its offering materials said only that the company’s business could be adversely affected by “the effects of Ebola virus disease, H1N1 flu, H7N9 flu, avian flu, Severe Acute Respiratory Syndrome, or SARS, or other epidemics” even though as of the offering materials’ effective date “the coronavirus was already ravaging China particularly Wuhan,” according to the lawsuit.

The offering price for the ADS, which are traded on the New York Stock Exchange, at the time of the IPO was $13.50 per share. The price at last Friday’s close was $6.97.

The suit charges also that the offering materials did not reveal that the company had received renter complaints that it had signed up tenants for bank loans without their knowledge.

“These issues presented known trends, uncertainties and risk that required disclosure in the Offering Materials,” said the lawsuit, which charges violations of U.S. securities law.

A spokesman for the company could not be reached for comment.

Putative class actions securities litigation in connection with the coronavirus has been filed against Inovio Pharmaceuticals Inc., Norwegian Cruise Line Holdings Ltd. and Zoom Video Communications Inc.

More insurance and risk management news on the coronavirus crisis here.