Some companies hide falling revenues or the loss of important personnel; some hide the results of studies of their products or the implications of impending events. But the complaint for this class action claims that Pingtan Marine Enterprise Ltd. was hiding, among other things, “violent ‘torture ships’ that implicate Pingtan in the modern-day slavery that has infected pockets of South East Asia’s fishing industry.”
The class for this action is all persons and entities who acquired the publicly-traded securities of Pingtan between August 8, 2016 and May 10, 2017.
Pingtan is a fishing company incorporated in the Cayman Islands with offices in Fuzhou, China. Its securities trade on the NASDAQ, and on August 8, 2016, it filed a second-quarter 2016 Form 10-Q with the SEC in which it reported that “we own 107 trawlers, 4 longline fishing vessels, 2 squid jigging vessels and 2 drifters and have exclusive operating license rights to 20 drifters. … These vessels are fully licensed to fish in Indonesian, Indian, or Western and Central Pacific Ocean of the international waters.”
It made a nearly identical statement in its third-quarter 2016 Form 10-Q filing.
On March 23, 2017, it filed a Form 10-K for the fourth quarter and year-end 2016. The complaint quotes the 10-K as listing the positions of some of its 135 fishing vessels, then adding that “the remaining vessels are licensed to operate in the Arafura Sea in Indonesia but temporarily not operating due to the moratorium discussed below.”
In fact, the complaint alleges, the company was banned from Indonesia, and had used investor capital to pay for illegal activity.
These allegations emerged on May 10, 2017, in a report on Pingtan by Aurelius Value that said that “Pingtan is specifically banned from Indonesia” and that “Indonesian Armed Forces raided Pintgan’s key fishing base and the Government implicated Pingtan and its affiliates in serious crimes that include human trafficking, forced labor, illegal fishing, forgery, and bribing corrupt officials.”
Also, it said, “With large undisclosed impairments, Pingtan is already indebted, losing money, and burning cash.” Even the some of the ships it claimed to have, the report said, were not its own. “This leads us to conclude that PME shares are likely worthless.” The report also claims to have gotten the “torture ships” information from Indonesian Supreme Court documents.
At the news, the company’s stock fell by over 28%.
The complaint concludes, rather tamely, that the company’s false and misleading statements are violations of the Securities Exchange Act of 1934. One hopes that Indonesia has made up a longer list of the laws that were violated on its turf.