Investors file class action lawsuits against China’s Joyy following Muddy Waters report

Class action lawsuits have been filed against Chinese livestreaming firm Joyy after the company’s stock fell amid its back-and-forth with Muddy Waters.

Photo credit: Joyy

Both suits from law firms Hagens Berman and Rosen Law Firm accused Joyy of making false and misleading statements regarding its China-focused livestreaming service YY Live. These include Joyy “dramatically” overstating its revenues from livestreaming sources and using bots to pump up its number of users.

“We’re focused on investors’ losses and proving Joyy deceived investors about the company’s true operations and financial results,” said Hagens Berman partner Reed Kathrein.

Investor rights law firm Bernstein Liebhard said it’s also currently investigating potential securities fraud claims on behalf of Joyy’s shareholders.

This development follows the release of Muddy Waters’ 71-page report that called Joyy a “fraud tech company.”

“It was clear to us from early on that YY Live was almost entirely fake,” the report read, adding that the company is “guilty of bot farming, creating fake transactions, and having fake users.”

“We conclude that YY Live is around 90% fraudulent. YY’s international livestreaming business Bigo seems barely more real,” Muddy Waters noted.

After the report was released on November 18, Joyy’s stock dropped US$26.53 per share to close at US$73.66. Its stock then jumped by 17% the following day, after the company had challenged Muddy Waters’ allegations.

“To conclusively refute the report’s false allegation regarding the authenticity of Joyy’s profit figures, the company is open to cash verification and diligence to be conducted by competent third-party advisers,” the company said in a statement.

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In response, Muddy Waters put out a statement explaining its methodology.

The report came shortly after Chinese search giant Baidu agreed to acquire YY Live in a US$3.6 billion deal.