Equipment manufacturer Canaan Creative became the first in the industry to go public in the U.S. when it launched its initial public offering (IPO) in the country in 2019. Things didn’t go as well as the company had hoped, with much less attention being given the initiative. Its problems went from bad to worse when the China-based company received word of a class-action lawsuit brought against it by investors in March, accusing the company of having gravely misrepresented its financial strength and possibilities. The lawsuit continues to move forward and, according to the plaintiffs’ law firm, Robbins Geller Rudman & Dowd LLP, it’s time for Canaan shareholders to step up and decide who will represent them in court.
The law firm issued a press release, asserting that the shareholders have until May 4 to make the determination. The suit pits the shareholders against Canaan and alleges that the company launched its IPO in violation of the Securities Act of 1993 and, although Robbins Geller is involved, it doesn’t have to be the only law firm representing shareholders if investors prefer to choose their own legal representative. That choice is ultimately left up to the shareholder, provided they respond before the deadline.
Brian Cochran, the Robbins Geller attorney who authored the press release, explains, “The Private Securities Litigation Reform Act of 1995 permits any investor who purchased Canaan securities pursuant to the IPO to seek appointment as lead plaintiff in the Canaan securities class action lawsuit. A lead plaintiff acts on behalf of all other class members in directing the Canaan securities class action lawsuit. The lead plaintiff can select a law firm of its choice to litigate the Canaan securities class action lawsuit. An investor’s ability to share in any potential future recovery of the Canaan securities class action lawsuit is not dependent upon serving as lead plaintiff.”
Canaan is accused of using “false and/or misleading statements” to garner interest in its IPO. It had asserted that it was in a “strategic cooperation” agreement with an independent company, Grandshores Weicheng Technology, but that firm was later determined to have close ties to the equipment manufacturer. It is also accused of having falsified certain financial details ahead of the IPO and of having tried to cover ties to “suspicious businesses.”
The IPO ultimately received only around a quarter of what Canaan had initially hoped. The weak results were exacerbated as news began circulating that it wasn’t going to be able to sustain its customer base because of “sales problems and market circumstances,” and its post-IPO share value plummeted by almost 50% to $4.63 on the NASDAQ exchange by December 18. It since saw a recovery to $8.04 in February, but is now trading at just $3.50.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.