According to the law firm press release, Youku operates as an Internet television company in the People's Republic of China. Its Internet television platform enables consumers to search, view, and share video content across various devices.
The Complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (1) the Company improperly recognized revenue for multi-element arrangements; (2) the Company improperly recorded certain nonmonetary transactions to exchange online broadcasting rights of video content with other online video broadcasting companies at the carrying values of the broadcasting rights transacted, instead of the properly-accounted fair value; (3) the Company improperly accounted for its licensed content as long-lived assets; (4) the Company lacked adequate internal controls over financial reporting; and (5) as a result of the foregoing, the Company's financial statements were materially false and misleading at all relevant times.
On Tuesday, March 17, 2015, the Company announced that it would release its fourth quarter results on Thursday, March 19, 2015, raising red flags by giving investors only two days-notice to prepare for YOKU's earnings announcement.
On March 19, 2015, the red flags materialized as the Company reported a net loss of $51.3 million, compared to $4 million in the same quarter of 2013. Moreover, YOKU disclosed that the SEC is investigating certain aspects of the Company's past accounting practices relating to revenue recognition for multi-part deals, accounting of "non-monetary exchanges of licensed content" and the classification of licensed content as long-lived assets. The Company also announced that it is now "evaluating the impact to its 2014 and historical financial statements."
In reaction to this news, YOKU's stock price dropped nearly 11%, from a March 19, 2015 closing price of $15.15 per share, to close at $13.50 on March 20, 2015.
The first identified case was voluntarily dismissed on May 22, 2015. The action continues in a later filed action docketed under 15-CV-02875.
The case was voluntarily dismissed on April 6, 2016.