Chinese online game company Giant Interactive said it’s innocent ...
Chinese online game company Giant Interactive said it’s innocent of allegations in a suit by disgruntled shareholders that it violated securities laws. The suit, filed in U.S. District Court, Manhattan, seeks class-action status. Giant’s primary title is the free-to-play…
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massively multiplayer online game ZT Online. The suit -- filed by Pyramid Holdings on behalf of it and other Giant shareholders -- claimed Giant and certain of its officers and directors violated the Securities Act of 1933 by making “inaccurate statements” about its business prior to making an initial public offering of stock early this month. Also named in the suit were Merrill Lynch and UBS Investment Bank, the lead underwriters of Giant’s IPO, who weren’t immediately available for comment Tuesday. More than 57 million shares of Giant’s American Depositary Shares were sold to the public at $15.50 per ADS, raising more than $886 million for the company. The suit claimed Giant’s registration statement and prospectus for the IPO failed to disclose the company had experienced a decline in average concurrent users (ACU) and peak concurrent users (PCU) in its third quarter due to a significant rule change for ZT Online. Giant, after the market closed Nov. 19, announced the game’s ACU fell 6 percent to 481,000 in Q3 from Q2, while the PCU 17.2 percent to 888,000. Giant then told analysts in a conference call the declines were because of a rule change implemented to discourage “gold farming” activity, in which a player aggressively attempts to acquire gold or other valuable items in a game, often to sell those items for a profit, the suit said. Although Giant mentioned the Q3 ACU and PCU figures, the suit complained the company “did not explain or describe the rule change in any meaningful fashion, did not highlight the negative trend in ACU and PCU and did not disclose the negative impact that the rule change was having at the time of the IPO.” Giant shares tumbled from $14.88 per share to $11.10 after the earnings announcement and conference call, the suit said. The plaintiff requested a jury trial and is looking to recover unspecified damages on behalf of all purchasers of Giant Interactive common stock during the class period, Nov. 1-19. Also requested was that Giant pay for the plaintiff’s legal expenses. The plaintiff is being represented by the law firm of Coughlin Stoia.