SAN DIEGO, December 10, 2021 / (Globe Newswire)
Shareholder rights law firm Johnson Fistel, LLP announces that it has filed a class action lawsuit on behalf of a class of all persons who: (a) purchased or otherwise acquired Cloopen Group Holding Limited (NYSE: RAAS) (“Cloopen” or the “Company”) American Depositary Shares (“ADSs”) pursuant and/or traceable to the registration statement and prospectus (collectively, the “Registration Statement”) issued in connection with the Company’s February 2021 initial public offering (the “IPO”); and/or (b) purchased or otherwise acquired Cloopen securities between February 9, 2021 and May 10, 2021, inclusive (the “Class”). The action was filed in the United States District Court for the Southern District of New York and is captioned Dong v. Cloopen Group Holding Limited et al., No. 1:21-cv-10610.
How to Join
The Private Securities Litigation Reform Act permits any investor who is a member of the Class described above to seek appointment as lead plaintiff. A lead plaintiff acts on behalf of all other class members in directing the litigation. The lead plaintiff can select a law firm of its choice. An investor’s ability to share in any potential future recovery is not dependent upon serving as lead plaintiff.
If you wish to seek appointment as lead plaintiff, please [click here to join], or contact lead financial analyst Jim Baker at firstname.lastname@example.org or 619-814-4471. If emailing, please include a phone number. There is no cost or obligation to you. Lead plaintiff motions must be filed with the court no later than February 8, 2022.
About the Case
The complaint charges Cloopen, its Chairman of the Board of Directors and CEO, and CFO with violations of the Securities Exchange Act of 1934. It asserts additional claims for violations of the Securities Act of 1933 against the Company, certain of its officers and directors, the underwriters of its IPO, and others.
According to the complaint, the Registration Statement led Cloopen ADS purchasers to believe that the Company’s much-touted growth strategy, which relied upon cross-selling, up-selling, optimizing existing solutions, and developing new features, was effective. Indeed, as portrayed in the Registration Statement, the complaint alleges that Cloopen appeared to be retaining and even expanding its customer base, as well as maintaining its key sales metrics such as dollar-based net retention rate, which reflected its ability to increase existing customer revenue. Yet, Cloopen’s growth strategy was allegedly not working, and its existing customers were abandoning the Company.
The complaint further charges that the Registration Statement failed to disclose that an increasing number of Cloopen’s customers were refusing to pay, forcing the Company to record massive increases in its accounts receivables and allowance for doubtful accounts. The Registration Statement also allegedly failed to disclose that Cloopen was weighed down by huge liabilities related to the fair value of certain recently-granted warrants.
According to the complaint, on March 26, 2021, just over six weeks after its IPO, Cloopen shocked the market when it published its 4Q 2020 and FY 2020 financial results, which closed on December 31, 2020, more than a month before the IPO. Cloopen reported 4Q 2020 revenues of just $39.6 million, $2 million shy of analysts’ consensus, net losses of $46.8 million, representing a staggering 466.9% increase year-over-year, and operating expenses of $27.6 million, representing a 30% increase over 4Q 2019. Cloopen blamed a “change in fair value of warrant liabilities of . . . US$34.4 million” for its net loss and “an increase in the provision for doubtful accounts resulting from increased in accounts receivables” for the 59.2% increase in general and administrative expenses. In response to this news, the price of Cloopen’s ADSs fell 18.5%, dropping from $14.42 per ADS on March 25, 2021 to $11.75 per ADS on March 26, 2021.
The complaint further alleges that thereafter Cloopen’s most senior officers continued to make materially false and misleading statements to the market and failed to reveal the true extent of Cloopen’s troubles. The complaint charges that in the March 26, 2021 earnings announcement and investor conference call, Cloopen’s senior executives continued to misrepresent the Company’s expansion strategy, again failing to acknowledge that the strategy was failing and its existing customer base was deteriorating; nor did they disclose that Cloopen’s dollar-based net retention rate had tumbled in 4Q 2020. The complaint alleges that weeks later, as Cloopen belatedly revealed additional facts about its failed growth strategy and withering customer base, including that its dollar-based net retention rate by year end 2020 fell far below historical periods, Cloopen’s share price fell again, closing at $8.97 per ADS on May 12, 2021.
About Johnson Fistel, LLP
Johnson Fistel, LLP is a nationally recognized shareholder rights law firm with offices in California, New York and Georgia. The firm represents individual and institutional investors in shareholder derivative and securities class action lawsuits. For more information about the firm and its attorneys, please visit https://www.johnsonfistel.com. Attorney advertising. Past results do not guarantee future outcomes.
Johnson Fistel, LLP
Jim Baker, 619-814-4471