The People’s Republic of China (PRC) exerts extensive control over information broadcast or published within its borders. The complaint for this class action claims that Weibo Corporation presented itself as observing all such laws, when in reality it did not even have a government license permitting it to operate its business.
The class for this action is all persons and entities who acquired the publicly-traded securities of Weibo between April 27, 2017 and June 22, 2017.
Weibo Corporation operates a social media platform that allows people to create and discover Chinese-language content. The company was incorporated in the Cayman Islands but has its main offices in Beijing, PRC.
Weibo filed a Form 20-F with the SEC for the 2016 fiscal on April 27, 2017, the beginning of the class period. The 20-F stated that the company had “taken measures to delete or remove links to content that, to our knowledge, contains information that violates PRC laws and regulations…”
A section entitled “Regulations on Information Security” reviewed PRC laws regulating Internet content. The complaint quotes it as saying the following about a PRC-based subsidiary: “Because Weimeng is an internet content provision operator…. Weimeng has completed the mandatory security filing procedures with local regulatory authorities. We regularly update our information security and content-filtering systems based on any newly issued content restrictions and maintain records of user information as required by relevant laws and regulations.”
The complaint claims that this information was false or misleading. On June 22, 2017, the Wall Street Journal came out with an article entitled “China Bans Political Content from Three More Platforms”—one of the three being Weibo. The article said that the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) said that Weibo and the other companies “had streamed political videos that were not in line with government regulations, and also promoted talk shows that contained negative viewpoints…”
On the same day, Weibo issued a press release acknowledging that it had received the SAPPRFT notice, and saying the companies’ services had been suspended “due to their lacking of an internet audio/video program license and posting of certain commentary programs with content in violation of government regulation on their sites…” It claimed that the company was “communicating with the relevant government authorities to understand the scope of the notice” and that it “will also evaluate the impact of this notice on its operations and its administrative options.”
At this new, Weibo’s stock price fell by over 6%.
The complaint claims that the company’s earlier statements were violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.