Wolf Haldenstein Adler Freeman & Herz LLP announces that a federal securities class action lawsuit has been filed in the United States District Court for the Southern District of New York on behalf of investors who purchased or otherwise acquired the American Depositary Receipts (“ADR’s) of Tuya Inc. pursuant and/or traceable to the Company’s March 2021 initial public offering (the “IPO”).
All investors who purchased the ADR’s of Tuya Inc. and incurred losses are urged to contact the firm immediately at classmember@whafh.com or (800) 575-0735 or (212) 545-4774.
If you have incurred losses in the ADR’s of Tuya Inc., you may, no later than October 11, 2022, request that the Court appoint you lead plaintiff of the proposed class. Please contact Wolf Haldenstein to learn more about your rights as an investor in the ADR’s of Tuya Inc.
Tuya offers a purpose-built “Internet of Things” cloud platform that delivers a suite of offerings including Platform-as-a-Service, or PaaS, and Software-as-a-Service, or SaaS, to business and developers. The Company’s proprietary products and services enable “smart devices,” e.g., household items and appliances connected to the internet, to communicate and interact with end users and online information and services.
Approximately 20% of Tuya’s customers sell products online through e-commerce marketplaces such as Amazon.com. In order to maintain the integrity of its platform, Amazon.com has long prohibited the practice of sellers compensating review writers for their reviews in most instances. Despite this prohibition, in April 2019, the consumer website Which? published a report claiming that Amazon had been “flooded by fake five-star reviews,” and that sellers were listing products that carried tens of thousands of unverified reviews.
In August 2020, a USC/UCLA research paper analyzed the market for fake reviewed products on Amazon.com. The paper found that the “vast majority” (84%) of sellers benefitting from fake reviews were located in China.
In September 2020, The Financial Times published an article entitled “Amazon deletes 20,000 reviews after evidence of profits for posts.” The article stated that Amazon had deleted 20,000 product reviews written by 7 of its top 10 UK reviewers.
On March 1, 2021, a data security organization, Safety Detectives, obtained access to a data server located in China that contained 7GB of data and over 13 million records appearing to be linked to a widespread fake review scam.
Leading up to the IPO, Tuya claimed to be experiencing phenomenal growth. In 2020, the Company claimed that its technology powered over 116.5 million smart devices in more than 1,100 product categories sold in over 220 countries and regions globally. Tuya claimed to be the “largest IoT PaaS business in the global market of IoT PaaS in terms of the volume of smart devices powered” and stated that its “business ha[d] scaled rapidly in recent periods,” growing revenue by 70% YOY to $179.9 million in 2020.
On February 26, 2021, Tuya filed a registration statement on Form F-1, which after amendments on March 12 and 16, 2021, was declared effective on March 17, 2021. On March 19, 2021, the Company filed a prospectus for the Initial Public Offering (“IPO”) on Form 424B4, which incorporated and formed part of the Registration Statement. The Registration Statement was used to sell over 45 million Tuya ADR’s at $21 per ADR, generating over $946 million in proceeds.
On May 11, 2021, an article on techcrunch.com revealed that “several top Chinese sellers disappeared from Amazon.” The report stated that over 13.1 million records documenting a massive fake review scam had been uncovered involving more than 200,000 Amazon accounts. Two months later, on July 9, 2021, verdict.co.uk reported that Amazon had “closed 340 online stores of one of its largest Chinese retailers in the first half of this year” as it cracked down against paid reviews and other violations of Amazon terms of service. According to the report, Amazon banned hundreds of Chinese brands across thousands of sellers’ account, many of which were clients of Tuya, citing repeated and significant violations.
Then on August 18, 2021, Tuya issued a press release announcing the Company’s financial results for 2Q 2021. The release guided the Company’s outlook for 3Q 2021, which stated Tuya expects revenue to be in a range of just $83 million to $86 million, which surprised and disappointed analysts and investors.
During the earnings call on that same day, management revealed that the reason for the low 3Q revenue forecast was that “our customers face a series of challenges, including Amazon’s strict execution of the seller policy.”
By August 2022, Tuya ADR had declined below $2 per ADR – 90% below where Tuya ADR’s were sold to the investing public in the IPO.
Wolf Haldenstein has extensive experience in the prosecution of securities class actions and derivative litigation in state and federal trial and appellate courts across the country. The firm has attorneys in various practice areas; and offices in New York, Chicago and San Diego. The reputation and expertise of this firm in shareholder and other class litigation has been repeatedly recognized by the courts, which have appointed it to major positions in complex securities multi-district and consolidated litigation.
If you wish to discuss this action or have any questions regarding your rights and interests in this case, please immediately contact Wolf Haldenstein by telephone at (800) 575-0735, via e-mail at classmember@whafh.com, or visit our website at www.whafh.com.
Wolf Haldenstein Adler Freeman & Herz LLP
Patrick Donovan, Esq.
Gregory Stone, Director of Case and Financial Analysis
Email: gstone@whafh.com, donovan@whafh.com or classmember@whafh.com
Tel: (800) 575-0735 or (212) 545-4774
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