NEW YORK, Jan. 18, 2020 /PRNewswire/ -- Pomerantz LLP announce that a class action lawsuit has been filed against Baozun Inc. ("Baozun" or the "Company") (NASDAQ: BZUN) and certain of its officers. The class action, filed in United States District Court, for the Southern District of New York, and docketed under 19-cv-11812, is on behalf of a class consisting of investors who purchased or otherwise acquired Baozun securities between March 6, 2019 and November 20, 2019, inclusive (the "Class Period"). Plaintiff seeks to pursue remedies against Baozun and certain of its most senior executives under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), and Rule l0b-5 promulgated thereunder.
If you are a shareholder who purchased Baozun securities during the class period, you have until February 10, 2020 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at [email protected] or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 9980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and number of shares purchased.
Baozun provides brand e-commerce services to brand partners in the People's Republic of China ("China"). Baozun generates revenues from two streams—product sales and services. The Company derives product sales revenues primarily through selling products on behalf of brand partners to consumers under the distribution model. The Company derives services revenues primarily through charging brand partners and other customers fees under the consignment model and the service fee model. For services provided under the consignment model and service fee model, the Company charges fixed fees and/or variable fees primarily based on the customer's Gross Merchandise Volume ("GMV") or other variable factors such as number of orders fulfilled.
Huawei Technologies Co., Ltd. ("Huawei") is a Shenzhen, Chinese-based multinational technology company that provides telecommunications equipment and sells consumer electronics, including smartphones. Unbeknownst to investors, Huawei was one of Baozun's largest brand partners, on a historical basis. Huawei paid more add-on fees for the work Baozun did for it, increasing the revenues Baozun received for Huawei work compared to the Company's other brand partners. This caused Baozun to report outsized revenue growth during the first half of 2019, which would be abruptly cut off during the second half 2019, after Baozun restructured the relationship as Huawei took much of its online merchandizing in-house.
The Complaint alleges that the statements were materially false and misleading when made because they failed to disclose the following adverse facts which were known to defendants or recklessly disregarded by them as follows: (a) that Baozun was heavily reliant upon a single brand partner, Huawei, for the exponential service fee growth it had been reporting historically, which was in turn fueling its historical revenue growth; (b) that compared to other brands Baozun had as brand partners, the Huawei work had historically included a lot of additional add-on service fees, increasing the revenue reported from Huawei vis-a-via its other brand partners; (c) that Huawei, like other large brands, was actively preparing to bring its online merchandising in-house, meaning Baozun knew that it was losing a significant brand partner; and (d) as a result of the foregoing, the Company was not on track to achieve the financial results and performance the defendants claimed the Company was on track to achieve during the Class Period.
August 21, 2019, Baozun conducted a conference call with investors and analysts, providing more positive commentary about the Company's purportedly strong then-present business metrics and financial prospects. During the conference call, Defendant Vincent Wenbin Qiu ("Qiu") Baozun's Chief Executive Officer, alluded to some ongoing restructuring of the Company's relationship with an unnamed "electronics" brand partner, without disclosing that it was Huawei, what Huawei's historical contribution to its service fees had been, or that the "restructuring" was being done because Huawei was moving its online merchandizing in-house. Rather, Defendant Qiu represented that the Company was merely pro-actively "optimizing" its own portfolio "toward high quality GMV."
On this news, despite that Baozun had not specifically disclosed that it was restructuring its relationship with Huawei, what Huawei's historical strong contribution to its service fees had been, or that the restructuring was being done because Huawei was moving its online merchandizing in-house—and that, rather, Defendants had claimed Baozun was merely pro-actively optimizing its own portfolio by emphasizing higher quality GMV partners going forward—the price of Baozun ADRs fell $6.31 per share below a close of $50.08 per share on August 20, 2019, to close at $43.77 per share on August 21, 2019, on unusually high trading volume of more than 7.8 million shares trading, or more than six times the average daily volume over the prior ten trading days.
On November 11, 2019, Baozun issued a press release announcing its 2019 Singles Day sales results. Baozun's release emphasized that "Baozun Sets New Total Order Value Record of RMB10.06 Billion on Singles Day 2019."
That day, Baozun also disclosed that it had lost an unnamed electronics brand partner, as well as the moderate adverse impact of that loss on total order value for Singles Day 2019. However, because the Company never quantified its significant reliance on Huawei for service fees, concealed that it was Huawei that the Company had lost as a service customer, and concealed the loss's material adverse impact on the Company's financial prospects, the investment community was still uninformed as to the true extent of that loss's negative impact on Baozun's business metrics and financial prospects. All Baozun stated that day was that: "[t]he record Singles Day total order value does not include the contribution from one electronics brand that Baozun stopped servicing during the third quarter of 2019 as part of its strategy to optimize its brand portfolio towards higher-quality growth," and that "[t]o provide a more accurate comparison, if the contribution from the electronics brand was excluded from 2018, the total order value for Singles Day 2019 would have increased by approximately 76% year-over-year," rather than the 53.6% increase in total order value for Singles Day 2019 reported that day.
On November 21, 2019, during pre-market hours, Baozun announced its 3Q19 financial results for the interim period ended September 30, 2019, and provided its 4Q19 financial guidance. Rather than the revenues of $214 million Baozun had led the investment community to expect, the Company reported revenues of just $210.3 million. Additionally, earnings per ADR of $0.14 were below the $0.15 per ADR the investment community had been led to expect. More critically, Baozun disclosed the electronics customer loss would negatively impact results for the rest of 2019 and for the first half of 2020, stating that for 4Q19 it now only expected revenues in the range of $384 million to $391.2 million, well below the $401 million the Company had led the investment community to expect based on its prior bullish Class Period statements.
On this news, the price of Boazun ADRs fell $7.60 per share, or 17.47%, to close at $35.90 per share on November 21, 2019, on unusually high trading volume of more than 8 million shares trading, more than eight times the average daily volume over the preceding ten trading days.
The Pomerantz Firm, with offices in New York, Chicago, Los Angeles, and Paris is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, the Pomerantz Firm pioneered the field of securities class actions. Today, more than 80 years later, the Pomerantz Firm continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomerantzlaw.com.
Robert S. Willoughby
SOURCE Pomerantz LLP