Qiao Xing Universal Telephone Case 8/9/2007
According to a press release dated August 9, 2007, the complaint alleges violations of the federal securities laws by Xing and certain of its executives. Specifically, as alleged in the Complaint, on July 17, 2007, before the opening of trading, Xing disclosed, among other things, that in connection with the audit of the financial statements of a Company subsidiary, certain misstatements for the years 2005, 2004 and 2003 were identified that were not initially detected through the Company’s internal control over financial reporting and that, as a result, management has decided to restate the Company’s consolidated financial statements for the years ended December 31, 2005, 2004 and 2003. As further alleged, during the Class Period, Xing overstated its reported net income for the years ended December 31, 2005 and 2004 by 2% and 93%, respectively, and for the year ended December 31, 2003, Xing understated its reported net loss by 210%.
The complaint further alleges that on July 17, 2007, the Company filed its annual report for the year ended December 31, 2006 on Form 20-F with the SEC that stated that the misstatements in the financial statements resulted from certain deficiencies in the Company’s system of internal controls over financial reporting.
In response to these announcements, on July 17, 2007, the price of Xing stock declined from $13.97 per share at the close of trading on July 16, 2007, to close at $11.04 per share, a decline of approximately 21%, on extremely heavy trading volume.