Giant Interactive Group Inc. Case 11/26/2007

You must submit the settlement "Proof" form attached below, in order to participate in this settlement. There is a strict deadline of December 15, 2011 by which all claims must be submitted. The instructions for submitting are included in the "Proof" and the "Notice" files attached below for your download. DO NOT SEND THE FORMS TO THE SHAREHOLDERS FOUNDATION, FOLLOW THE DIRECTIONS IN THE "PROOF".

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Company Name(s): 
Giant Interactive Group
Case Name: 
Giant Interactive Group Inc. Case 11/26/2007
Case Status: 
Lawsuit Filed
Case Status: 
Settlement Proposed
Affected Securities
NYSE: GA
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
11/26/2007
Class Period Begin: 
11/01/2007
Class Period End: 
11/19/2007
Date Settled: 
10/26/2011
Settlement Amount: 
$13,000,000
Deadline to Participate in Settlement: 
12/15/2011
Summary: 

AUGUST 2011 - According to the Notice:

The proposed settlement creates a fund in the amount of $13,000,000 in cash and will include interest that accrues on the fund prior to distribution. Your ability to recover from the Settlement Fund will depend on a number of variables, including the number of Giant ADS you purchased during the period from November 1, 2007 through and including November 19, 2007, and the timing of your purchases and any sales. Co-Lead Counsel estimate that if claims representing 100% of the number of ADS entitled to participate in a distribution from the Net Settlement Fund are made, the average distribution per share will be approximately $0.39 before deduction of Court-approved fees and expenses. Typically, claims for less than 100% of eligible securities are submitted to the Claims Administrator and, thus, average distributions are higher than that estimated above. Lead Plaintiffs and the Defendants do not agree on the average amount of damages per share that would be recoverable if the Lead Plaintiffs were to have prevailed on each claim alleged. The issues on which the parties disagree include: (1) the amount by which Giant ADS were allegedly artificially inflated (if at all) during the Class Period; (2) the effect of various market forces influencing the trading price of Giant ADS at various times during the Class Period; (3) the extent to which external factors, such as general market and industry conditions, influenced the trading price of Giant ADS at various times during the Class Period; (4) the extent to which the various matters that Lead Plaintiffs alleged were materially false or misleading influenced (if at all) the trading price of Giant ADS at various times during the Class Period; (5) the extent to which the various allegedly adverse material facts that Lead Plaintiffs alleged were omitted influenced (if at all) the trading price of Giant ADS at various times during the Class Period; and (6) whether the statements made or facts allegedly omitted were material, false, misleading or otherwise actionable under the securities laws of the United States.

The Lead Plaintiffs believe that the proposed settlement is a good recovery and is in the best interests of the Class. Because of the risks associated with continuing to litigate and proceeding to trial, there was a danger that the Class would not have prevailed on any of its claims, in which case the Class would receive nothing. The amount of damages recoverable by the Class was and is challenged by the Defendants. Recoverable damages in this case are limited to losses caused by conduct actionable under applicable law and, had the Litigation gone to trial, Defendants would have asserted that all or most of the losses of Class Members were caused by non-actionable market, industry, or general economic factors. The Defendants would also assert that throughout the Class Period the uncertainties and risks associated with the purchase of Giant ADS were fully and adequately disclosed.

NOVEMBER 2007 - According to a law firm press release dated November 26, 2007, a class action has been commenced on behalf of purchasers of Giant Interactive Group, Inc. American Depositary Shares pursuant and/or traceable to the Company’s initial public offering on or about November 1, 2007 through November 19, 2007.

The complaint charges Giant Interactive and certain of its officers and directors with violations of the Securities Act of 1933. Giant Interactive develops and operates online games in the People’s Republic of China. The Company’s primary game is ZT Online which is a free-to-play massive multi-player online game.

According to the complaint, on or about October 31, 2007, Giant Interactive filed with the Securities and Exchange Commission a Form F-1/A Registration Statement, for the IPO. On or about November 1, 2007, the Prospectus with respect to the IPO, which forms part of the Registration Statement, became effective and, including the exercise of the over-allotment, more than 57 million shares of Giant Interactive’s ADSs at $15.50 per ADS were sold to the public, thereby raising more than $886 million. The complaint alleges that the Registration Statement and the Prospectus failed to disclose that the Company had experienced a decline in average concurrent users (“ACU”) and peak concurrent users (“PCU”) for the third quarter of 2007 due to a significant rule change for ZT Online.

On November 19, 2007, after the close of the market, Giant Interactive issued a press release announcing its financial results for the third quarter of 2007, the period ending September 30, 2007. Among other things, the Company reported that ACU for the third quarter was 481,000, a decrease of 6% from the second quarter of 2007 and that PCU for the third quarter was 888,000, a decrease of 17.2% from the second quarter of 2007. Then, on November 20, 2007, before the market opened, Giant Interactive held a conference call with analysts and investors to review the Company’s earnings release. During the conference call, Giant Interactive attributed the decline in the third quarter ACU and PCU figures to a rule change to ZT Online that was implemented to discourage gold farming activity. Following the Company’s earnings release and conference call, on November 20, 2007, the price of Giant Interactive ADSs dropped from $14.88 per ADS to $11.10 per ADS on extremely heavy trading volume.