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Qutoutiao Inc.

Company NameQutoutiao Inc.
Stock SymbolQTT
Class PeriodSeptember 14, 2018 to July 15, 2020
Lead Plaintiff Motion DeadlineOctober 19, 2020

In September 2018, the Company completed its IPO, selling 13.8 million ADSs at $7.00 per share.

On December 10, 2019, Wolfpack Research published a report, alleging among other things, that the Company had overstated its revenues by recording non-existent advances from advertising customers. Moreover, the report alleged that Qutoutiao replaced its third-party advertising agent with a related party, thereby bypassing the agent’s oversight and allowing the Company to “perpetrate the unmitigated ad fraud that [Wolfpack] observed in [its] sample.”

On this news, the Company’s share price fell $0.12, nearly 4%, to close at $2.86 per share on December 11, 2019, on unusually heavy trading volume

On July 15, 2020, hosts of a consumer rights gala stated that Qutoutiao had allowed ads on its platform promoting exaggerated or impossible claims from weight-loss products. For example, one such ad offered free weight-loss products valued at $14,300 that would help users lose more than 30 pounds a month.

On this news, the Company’s share price fell $0.85, or 23%, to close at $2.84 per share on July 16, 2020, on unusually heavy trading volume.

The complaint filed in this class action alleges that Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: : (1) that Qutoutiao replaced its advertising agent with a related party, thereby bypassing third-party oversight of the content and quality of the advertisements; (2) that the Company placed advertisements on its mobile app for products whose claims could not be substantiated and thus were considered false advertisements under applicable regulations; (3) that, as a result, the Company would face increasing regulatory scrutiny and reputational harm; (4) that, as a result, the Company’s advertising revenue was reasonably likely to decline; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects, were materially misleading and/or lacked a reasonable basis.

 

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