Jumei.Com Pformation "Distress" Encountered Class Action

Jumei.com, which has only been listed for more than half a year, is being collectively "surrounded" by a number of American law firms and a Chinese law firm.

In May 16, 2014, jumei.com, which was listed on the New York stock exchange, created a miracle of electricity business: from 2010 to later, it only took 4 years for jumei.com to go on the market. After that, CEO Chen, who had overseas study background and star temperament, went on to speak for herself.

But after just 7 months, jumei.com's past glory was no longer due to declining performance and shrinking share prices. In fact, class action was common in the United States, but the test of young jumei.com and its executive Chen Ou was far more than that.

Encountering class action

According to information from the US on December 16th, the Milberg LLP law firm announced that the firm is investigating jumei.com (JMEI) and has represented investors who bought jumei.com shares between May 16, 2014 and November 19th to initiate a suit in the United States District Court in eastern New York.

The law firm alleges that in the above-mentioned class action period, jumei.com and its specific executives violated the Federal Securities Act and issued a wrong and misleading statement to the investing public.

This includes jumei.com, which is changing its revenue model from market services to commodity sales, which has made significant risks to its successful financial performance. Jumei.com has not expanded its market services as it calls it.

As a result, when these negative facts are known, the value of jumei.com's stock is down, which hurts investors.

In August 19th of 2014, jumei.com's stock price had reached a maximum of $39.45 per share, and its lowest price fell to $12.7 per share as of December 17th.

In just four months, its share price shrank by nearly 70%.

"The fall in share price is only one factor, because a company's simple stock price decline is not necessarily caused by the violation of the listed company."

Hao Junbo, a Chinese lawyer who summoned investors to participate in the class action, told the reporter of China business newspaper.

Hao Junbo said that filing a class action against jumei.com can be filed on the court of the United States, which requires two conditions: on the one hand, it may be fraudulent. On the one hand, investors do invest losses.

"In such a case, even if there is no conclusive evidence, if there is reasonable doubt, it can be prosecuted.

After prosecution, the complaint can also be amended, or the evidence can be handed in again.

Only after entering the stage of litigation can lawyers have the right to carry out relevant investigations with judicial procedures.

Hao Junbo told reporters.

After encountering the collective "fight" of the law firm, jumei.com also responded that the board of directors approved a stock buyback plan on 15 th, and announced that it would buy up to 100 million US dollars in the next 12 months to boost its share price.

And Chen Ou also responded in the following December 16th, micro-blog said, "jumei.com is the cleanest electricity supplier".

In December 17th, in the context of China's stock price inflation, Chen's response to jumei.com's stock price also overturned and rebounded.

On the same day, its share price rose by 7.96%, which ended at $13.83 per share.

Do not have the model conversion?

In May 16, 2014, when jumei.com was listed on the NYSE, Chen, 31, became the youngest CEO in China's Listed Companies in the US.

In the 4 years from March 2010 to the beginning of the listing, except for the $180 thousand angel investment from Xu Xiaoping, and the investment of several VC in 2011, such as Sequoia Capital, and so on, the fast profitable jumei.com did not make any other financing until IPO was launched.

However, the rapid development in 2014 ended abruptly. In the three quarter, the total net paction volume of jumei.com increased by 31.4% compared to the same period last year, and net revenue was 157 million 700 thousand US dollars, up 28% from the same period last year, much lower than expected.

It was a far cry from the contrast: in 2011, its operating income was $21 million 800 thousand, compared with $233 million 200 thousand in 2012, an increase of 900% over the previous year, and 483 million US dollars in 2013, an increase of 107% over the same period last year.

In response to slower growth and falling share prices, Chen Ou also responded in his micro-blog, pointing out that the negative impact of "fake rumors" and the double effects of the third party business of luxury goods were cut off.

Insiders told reporters that the root cause of jumei.com's collective prosecution in the United States lies in the sharp adjustment of its business mode and the resulting slowdown.

"Before I passed Chen Ou Gou, he said that cosmetics were mainly self operated, while other products made efforts to build an open platform and scale up.

The traffic will be huge.

Because he wanted to run all the way to catch up with vip.com, which was more difficult. But later, because of the fake products and jumei.com pressure, the third party platform was cut down and done by itself.

But at that time, when IPO was really the third party platform as a center of gravity.

An insider close to jumei.com told reporters that the pformation of jumei.com's business model is beyond all circumstances.

It is understood that in 2013 alone, about 30% of jumei.com's sales came from third party businesses' non proprietary businesses.

The growth of the third party business has also become a great promoter of jumei.com's listing in the US.

In the description of jumei.com prospectus, the first goal is to expand the category of commodities and continue to expand the number of third party businesses.

However, "some time ago, the seller's third party platform watches the sale of fake watches.

The core business of poly beauty is self made cosmetics. The third party watches are totally marginal businesses, but they hurt the most in this incident.

Chen Ou said in micro-blog.

Since then, jumei.com's practice is not only to turn off the shops involved, but Chen Yu's "micro-blog knife Palace" in micro-blog, that is, "cut off the entire third party luxury business lines, and have all the authorized ones to stop, and solve this problem from the root."

It is understood that after the adjustment of jumei.com, a small part of the makeup business has also been cut off from the third party platform, all of which have been converted into warehouses and self operated businesses.

Only costumes and accessories are still operating under the third party platform.

To weaken the third party platform is to strengthen the control and control of the supply chain and improve the quality of the supply chain, so as to effectively avoid the risk of "fake" and "parallel imports".

The clothing and accessories business is a "non Gao Min perceptual category" and will still operate under the third party platform of jumei.com.

"The gross profit of open platform is higher, because it has traffic realisation.

But its disadvantage is that it is difficult to control fake goods.

Any one of them.

There's pressure.

The third party's open platform is not to say that there is no opportunity. The key is how to supervise counterfeit goods.

Business analyst, Wan Qing consulting CEO Lu Zhenwang told reporters.

Long term test

Although it seems that there are reasons for this, it is not enough. However, under the American legal culture with the tradition of litigation, jumei.com has to face collective "doubts" from investors.

"Fake things make jumei.com very passive, so we can only cut down the business of third party platforms.

But it still brings some problems to investors, because at that time the focus was on the good development of the third party platform, which could be done in the future.

But now they are all self-employed.

There is a certain distance between the above expectations and the investors' goals.

Lu Zhenwang said.

At the same time,

Also said, "this kind of litigation is more common in the United States, and listed companies are insured liability insurance.

Generally speaking, the insurance company will compensate for the settlement after the settlement.

However, if the court decides that the enterprise is fraudulent, the insurance company will not pay for it. "

It can be said that class action is not a big worry for jumei.com, but the real "headache" is the most self reliant cosmetics business.

"The situation of the cosmetics business is not easy, and it faces both the competition of the comprehensive e-commerce providers and the trust crisis of consumers."

Du Yanhong, a retail researcher at CIC, told reporters.

Moreover, jumei.com, who has completely returned to its own camp, needs to put aside its past "scenery" and concentrate on preparing for intensive cultivation.

"The flow of cosmetics itself is quite large, and its demand and viscosity are enough.

If this piece is done well, the next step can be extended.

If cosmetic is not done well, blind expansion of self owned products will lead to problems.

Lu Zhenwang said, for jumei.com, the main task at present is to make cosmetics self run well.

Because this piece needs to cooperate more closely with the manufacturer, it also needs to widen the width of the entire cosmetics.

"This advantage will take a relatively long time to build."