Hannuri Law LLC filed a securities class action lawsuit against Fadu and underwriters - NH Investment & Securities and Korea Investment & Securities
Hannuri Law LLC filed a securities class action lawsuit against Fadu and underwriters
- NH Investment & Securities and Korea Investment & Securities
On March 14, 2024, Hannuri Law LLC filed a class action lawsuit under the Securities-Related Class Action Act in the Seoul Central District Court and Seoul Southern District Court against Fadu, NH Investment & Securities Co., LTD., and Korea Investment & Securities Co., LTD. (hereinafter referred to as “defendants”).
This is a securities class action lawsuit brought by shareholders who participated in Fadu's initial public offering in July 2023, alleging that the defendants falsely represented in the registration statement and investment prospectus that revenues would continue to increase, while Fadu's revenue for the second quarter of 2023 was virtually zero due to the cancellation of orders from a major customer, and prospects for future revenue were pessimistic.
At the time of IPO, defendants made false statements in the registration statement and prospectus, such as "Fadu’s revenue is expected to continue to grow rapidly in 2023" and "the expected revenue in 2023 will reach KRW 102.3 billion”(an increase of 113% YOY), valuing the shares based on the inflated revenue and net profit prospects and setting the public offering price at 31,000 won, which is 310 times the par value (100 won).
However, at the time of disclosure of the statements, Fadu had already recognized only KRW 59 million in revenue in the second quarter and an operating loss of KRW 15.3 billion due to the cancellation of orders from a major customer. The outlook for the third quarter of 2023 and beyond was pessimistic, with total revenue for the entire business year of 2023 dropping to KRW 22.5 billion (a decrease of 60% YOY). When Fadu's Q2 and Q3 2023 results were released on November 8, 2023, Fadu's stock price immediately plummeted, falling more than 40% from its IPO price. Even today, Fadu's stock price has fallen below the KRW 20,000 mark and remains well below the offering price. As a result, Plaintiffs who participated in Fadu's offering and suffered losses have filed this action to recover damages on behalf of the class.
This is a class action under the Securities-related Class Action Act brought by a person who files lawsuit to become a representative party on behalf of a class of victims (the "Class"). The class in this action is limited to those who acquired Fadu stock in IPO in reliance on the misrepresentations in the registration statement & prospectus and suffered damages by disposing shares on or after November 8, 2023, when Fadu's actual performance became publicly known or still holding. A separate action for investors who purchased Fadu stock on the open market and suffered losses will be pursued separately, subject to further factual and legal review.
In Korea, a total of 11 securities class actions have been filed since the Securities-related Class Action Act became effective on January 1, 2005, but this is the first case of securities class action in relevance with an IPO.
[Hannuri Law LLC]
Hannuri, established in 2000, is one of the longest-standing and the most successful plaintiff law firms in Korea. We have not only successfully represented investors who suffered losses due to securities fraud and financial scams, but also have extensive experience in handling complex litigation cases in various areas, including antitrust/competition, whistleblower cases, corporate governance, consumer fraud matters, and commercial litigation.
In particular, we have represented six of the 11 securities-related class action lawsuits filed to date and have obtained judgment or settlements in four of them, including Cmotech case, the GS E&C case, and the Deutsche Bank and Royal Bank of Canada ELS price manipulation case. The pending case is the Osstem implant securities-related class action lawsuit filed in December 2022.
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