Baxter v. PDD Holdings Inc. et al

On November 19, 2024, Labaton Keller Sucharow was appointed lead counsel in a securities class action against PDD Holdings Inc., f/k/a Pinduoduo Inc., (PDD or the Company) and certain PDD executive officers and directors (collectively, Defendants).

The lawsuit alleges violations under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and U.S. Securities and Exchange Commission Rule 10b-5 promulgated thereunder, on behalf of all persons or entities who purchased or otherwise acquired PDD securities between April 30, 2021, and September 12, 2024, inclusive (the Class Period).

PDD operates the online marketplaces Pinduoduo and Temu, which allow Chinese merchants to sell goods to consumers around the world.  The action alleges PDD misled investors about the sustainability of the Company’s revenue growth, failure to prevent goods made by forced labor from being sold on its platform, and risks of poor merchant and customer relationships.  Further, the Company’s 2020 Annual Report allegedly contained materially false and misleading statements about risks to the Company’s brand and reputation related to its improper use of data, its failure to protect confidential information, and scrutiny of the Company. The 2021, 2022, and 2023 Annual Reports allegedly contained similar false statements and misrepresentations.

In 2023 and 2024, a series of disclosures in various news outlets led to several drops in the price of PDD American Depository Shares (ADS).  These included reports that PDD platforms could bypass users’ cell phone security to monitor the users’ activities in other apps, change settings, and read private messages, as well as reports on Congressional investigation into the flow of goods from China to the United States made with forced labor, lawmakers’ demands for a ban on goods sold by Temu, and a press release from the Attorney General of Arkansas suing Temu for violations of the Arkansas Deceptive Trade Practices Act and the Arkansas Personal Information Protection Act.  Additionally, in July 2024, hundreds of merchants began protesting at the Pinduoduo office in southern China, demanding PDD refund penalties that they claimed were arbitrarily imposed.  Further declines in the ADS price resulted after PDD disclosed its quarterly results for the second quarter of 2024, announcing that it had decided not to issue dividends or repurchase shares for the “foreseeable years ahead,” and PDD stated that it expected its future profitability would be weighed down by reduced transaction fees for high quality merchants.  The price fell again after the Biden Administration’s announcement in September 2024 that it was cracking down on de minimis shipments with unsafe or unfairly traded products, targeting Chinese e-commerce platforms specifically.

The case is Baxter v. PDD Holdings Inc. et al, No. 1:24-cv-05653-PKC-CLP (E.D.N.Y.).  Labaton Keller Sucharow represents Lead Plaintiff Boston Retirement System.