New Oriental Education & Technology Group Inc. (EDU:US), China’s largest private-education provider, was sued by investors in its U.S. shares after the U.S. Securities and Exchange Commission began investigating the company.
The American depositary receipts (EDU:US) fell 57 percent over two days after New Oriental said July 17 that the SEC was probing the consolidation of its units’ financial statements. The plunge capped nine consecutive trading days of declines, the ADRs’ longest losing streak since the Beijing-based company’s initial public offering in 2006.
Investors in the ADRs, led by Kin Shing Wong, are seeking compensatory damages for the stock losses and class, or group, status for the suit filed yesterday in federal court in the Central District of California. The investors cited a July 18 research report alleging that New Oriental inflated cash balances to obtain approval from its auditor.
The report, by Muddy Waters LLC, also questioned whether New Oriental could consolidate its operations, because the Chinese schools conducting lessons are ultimately state-owned.
The case is Wong v. New Oriental Education & Technology Group Inc., 12-cv-06316, U.S. District Court, Central District of California.
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