According to a press release dated November 21, 2006, on September 28, 2006, the Court issued an order granting the defendants' motion to dismiss the consolidated complaint, with leave to amend on or before October 30, 2006. No amended complaint was filed. On November 17, 2006, the Court entered an Order dismissing the action with prejudice.
According to a journal article dated October 11, 2006, between January 21, 2005 and March 10, 2005, seven putative class actions alleging securities fraud were filed against the defendants. On July 26, 2005, this Court consolidated these actions and appointed Floyd W. Webster, Keith Webster, Kent Webster, Amil Dipadova, and Robert Wistrand (collectively, the 'Webster Group') as Lead Plaintiffs. On August 25, 2005, the Webster Group filed its complaint. Pursuant to Federal Rule of Civil Procedure 12(b)(6), defendants move to dismiss the complaint for failure to satisfy the heightened pleading requirements for securities fraud under Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act of 1995 (the 'PSLRA'), 15 U.S.C. § 78u-4. [FN2] For reasons set forth below, defendants' motion to dismiss is granted, with leave to plaintiffs to replead. … The Court grants plaintiffs leave, if so advised, to file and serve an amended complaint on or before October 30, 2006, if plaintiffs are able to so in a manner consistent with the provisions of Federal Rule of Civil Procedure 11. Defendants are directed to answer an amended complaint, if one is served and filed, in the form and within the time specified by the Rules. It is SO ORDERED.
The complaint charges 51job and certain of its officers with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company improperly recognized recruitment advertising revenue in the third quarter; (2) that the Company, a purported expert in Chinese labor markets, failed to realize that the drop in late- December advertising suggested that many Chinese firms have adopted a more Western schedule for hiring; (3) that as a result of this market shift, the Company was forced to sharply lower its profit outlook; and (4) that as a consequence of the foregoing, defendants lacked a reasonable basis for their positive statements about the Company's growth and progress.
Further, on or around January 18, 2005, before the market opened, 51job announced softness in sales for the latter part of the month of December 2004, the exit of the peripheral stationery and office supplies business and updated guidance for the fourth quarter of 2004. The Company expected fourth quarter total revenues to be between RMB117 and RMB121 million, compared with RMB140 million, the low-end of its previous forecasted range. The news shocked the market. As a result, shares of 51job fell $15.49 per share, or 35.37 percent, on January 18, 2005, to close at $28.32 per share, on unusually high volume.