The Chinese automaker Kandi Technologies and some of its executives were recently served with a securities class action suit alleging a number of false or misleading statements about its operations. To learn more about this case, visit Battea’s Kandi Technologies case summary.
Specifically, the suit alleges that problems for the company started to crop up in mid-November of last year when its chief financial officer resigned, potentially stemming from an inability of the firm to maintain proper controls over its financial reporting. As a consequence, Kandi noted in mid-March that it would likely have to revise its full-year financial reporting for both 2014 and 2015, as well as its numbers for the first three quarters of last year. As a consequence of all these issues, the suit alleges that the company and certain executives made false or misleading statements about Kandi’s operations and prospects.
The suit was filed in the U.S. District Court for the Central District of California, and has a class period from March 16, 2015 to March 13, 2017.
The auto manufacturer Kandi Technologies faces a securities class action lawsuit.What happened?
On Nov. 14 of last year, Kandi CFO Cheng Wang resigned from his position after 20 years on the job, and instead took over responsibilities related to Kandi’s corporate strategies and investments, the company announced.
“We greatly appreciate the contributions Mr. Cheng Wang made to the Company as its former Chief Financial Officer, and in particular his important commitment to improving the Company’s financial transparency and efficiency,” said Xiaoming Hu, Chairman and Chief Executive Officer of Kandi. “Mr. Wang will now assist us in exploring new opportunities to maintain profitability and help us develop strategic initiatives for our sustainable growth. Mr. Wang will continue to be a key member of our management team and we believe he will meet our expectations and help us accelerate our growth.”
However, about four months later, as part of reporting the company’s full-year 2016 financial results, Kandi revealed “certain financial reporting issues” for 2014, 2015, and the first nine months of 2016. As a consequence, Kandi will have to restate its previously issued financial information at a later date. The company further noted that the restatements will not affect its previously reported net income.
“Going forward, we are confident with the continued support of our investors, we will be able to focus on innovation and regain our leading market position,” Hu said.
The stock price reaction
At the start of the class period in March 2015, Kandi Technologies stock was trading at nearly $13.25 per share. It fell to a 2015 low of just over $5 per share by October. It then recovered somewhat, closing the year at $10.90. The price has been moving downhill ever since.
Soon after Cheng’s resignation was announced, the stock hit just $3.65 per share, and dropped from $4.05 to $3.70 upon news of the necessary financial restatements. Today, Kandi Technologies is trading at just $3.81 per share.
For more information on this case or other class action litigations, please contact Kevin Doyle, Senior Vice President, at 203-987-4949 or info@battea.com.