Chinese Mecox Lane faces 2 US class action lawsuits

16:23, December 06, 2010      

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Mecox Lane, Ltd., the first Chinese B2C company listed in the United States, is currently facing two class action lawsuits after its share price fell below the issue price.

U.S.-based Rosen Law Firm filed a class action lawsuit against Mecox Lane on Dec. 4 on behalf of the purchasers of the company's shares, alleging that certain directors, senior executives and underwriters of the company are liable under the Securities Act of 1993 for inaccurate and misleading information in its IPO registration statement.

The law firm alleges that contrary to Mecox Lane's registration statement filed with the Securities and Exchange Commission (SEC), the company's gross margins have been adversely impacted by increased costs and expenses, which made it impossible for Mecox Lane to achieve the results it promised at the time of the IPO. When the truth was revealed on Nov. 29, 2010, the value of the company's shares dropped sharply, and investors suffered great losses.

This is the second class action lawsuit filed against Mecox Lane in a week. Another U.S. law firm Kahn Swick & Foti, LLC (KSF) and KSF partner Charles C. Foti, Jr., former attorney general of Louisiana, announced the commencement of the firm's securities class action lawsuit against Mecox Lane earlier last week.

Sun Jie, an Internet analyst in China, said that Mecox Lane's shares falling below the issue price and the two class action lawsuits have created a very bad impression of Chinese Internet companies. Online retailers such as Dangdang and Vancl as well as video-sharing sites such as Youku and Tudou are lining up for listing in the United States, but will face difficulties because the SEC will likely be more critical of listing applications from China.

By People's Daily Online


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