JD faces test as investor lawsuits loom after CEO Liu’s arrest

Source:Global Times Published: 2018/9/6 21:33:40

JD.com Inc (JD) is facing another test following the arrest and release of company founder and CEO Liu Qiangdong, as several law firms from China and the US are trying to gather material for lawsuits.

Three US investor rights law firms announced on Wednesday that they are investigating potential securities claims on behalf of JD shareholders.

Hao Junbo, a lawyer at Beijing-based Hao Law Firm, told the Global Times that his firm is also hearing from investors who lost money due to JD's disclosure issue. "About 20 investors have come to me," Hao said.

Liu was arrested in the US state of Minnesota on charges of first-degree rape on Friday (US time), but he was released from custody without any charges or bail the following day before returning to China, according to media reports.

Following the incident, JD has so far filed no disclosures with the US Securities and Exchange Commission. The most recent filing is on August 17 about foreign private issuer.

Whether the company provided a faithful disclosure that complies with relevant US laws and regulations is vital in determining whether JD is vulnerable to investor lawsuits, said Yan Yiming, a criminal lawyer based in Shanghai.

Meanwhile, a Chinese bank reportedly called for a compliance alert on its cooperation with JD. An employee of the bank confirmed to the Global Times on condition of anonymity that the compliance department of the bank had issued a warning calling for a review on the risks of cooperation between the bank and JD, citing Liu's sinking reputation. The bank is currently working with JD on finance services.

JD investors can only sue the company itself for giving misleading information concerning such an incident, Yan said.

JD on Sunday issued a statement on its Weibo account, saying Liu was wrongly charged. A Monday update said that Liu had not been charged with any crime.

A Caijing report on Thursday cited a lawyer as saying that what was posted on Weibo could indeed be classified as misleading information.

Some analysts suggested that the company faces "key-person risk," a risk a company faces when its key executive runs into trouble.

Liu is the second-largest shareholder of JD after Chinese tech giant Tencent Holding. Liu holds 15.8 percent of the company's shares and nearly 80 percent of JD's voting rights.

JD's shares rose by 4.2 percent on the NASDAQ at Thursday's opening, being the first time of increase since the CEO's scandal took place.

Posted in: COMPANIES

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