Subaye, Inc. (NASDAQ: SBAY)
MURRAY, FRANK & SAILER LLP is investigating securities fraud claims against Subaye, Inc. ("Subaye" or the "Company") (NASDAQ: SBAY) and certain of its officers, on behalf of purchasers of Subaye securities between December 29, 2009 and April 7, 2011, inclusive (the "Class Period").
The investigation concerns violations of the Securities Exchange Act of 1934 (the "Exchange Act") that occurred when the Company and certain of its officers issued materially false and misleading statements or omitted to state material information during the Class Period regarding Subaye's financial performance, business operations and growth prospects. As a result of these misstatements, Subaye's stock traded at artificially inflated prices throughout the Class Period.
On February 14, 2011, the Company filed with the SEC a Form NT 10-Q, stating that it was unable to timely file its Form 10-Q for the first quarter ended December 31, 2010, due to ongoing closing procedures, insufficient availability of accounting and administrative staff, and the Chinese New Year holidays. Subsequently, on February 22, 2011, the Company issued a press release announcing that it would require additional time to file its Form 10-Q, due to the reasons previously stated, and because the timing and completion of certain meetings with third party vendors, significant shareholders and sales agents had been difficult to arrange. The press release stated that the Company expected the meetings to take place over the coming weeks, and once they were complete, the Company expected to finalize its financial reporting for the quarter ended December 31, 2010. In response to the news, Subaye's stock price dropped from a close of $8.20 per share on February 22, 2011 to a close of $7.20 per share on February 23, 2011, a drop of approximately 12%, on unusually heavy trading volume.
On March 14, 2011, the Company announced that its CFO, James T. Crane, had resigned. On the news, the Company's stock price fell from a close of $5.92 per share on March 14, 2011 to a close of $4.36 per share on March 15, 2011, a drop of approximately 26%.
Subsequently, on March 24, 2011, financial website GeoInvesting.com issued a report (the "Report") alleging that (1) Subaye had a massive discrepancy in its corporate structure that rendered its stock worthless, because, in GeoInvesting's opinion, U.S. investors have no claim to Subaye's potential revenues and profits; (2) GeoInvesting could not locate 1,500 employees the Company claimed to have, and in fact, it appeared that the company had no more than 40 or 50 employees, some of whom were shared with another company; and (3) GeoInvesting could not construct a reasonable scenario under which Subaye could generate the revenues it claimed to generate. GeoInvesting reported that it had sent a copy of the Report to Subaye's auditors, Pricewaterhouse Coopers and to James T. Crane, who resigned after he received the Report. In response to the Report, Subaye's stock price fell from a close of $3.74 per share on March 24, 2011, to a close of $3.30 on March 25, 2011, a drop of approximately 19%.
Finally, on April 7, 2011, after the close of trading, Subaye filed with the SEC a Form 8-K announcing the resignation of its auditor Pricewaterhouse Coopers Hong Kong ("PwC"). The Form 8-K listed multiple red flags observed by PwC prior to their resignation, including (1) inability to obtain information and/or supporting documentation to verify cash settlements from sales agents to the Company, or end customer subscriptions for the Company's services, among other things; (2) inadequate documentation to substantiate the marketing promotion activities performed by sales agents in return for fees paid and recorded expenses of the Company; (3) insufficient explanation by the Company of certain commonalities between customers and vendors; and (4) no evidence of any business tax payments by the Company for services rendered in China. Following the announcement, the Company's stock price dropped from a close of $2.25 on April 6, 2011 to a price of $2.15 during trading on April 7, 2011. Shortly thereafter, on April 7, 2011, trading in the Company's stock was halted on NASDAQ.
If you purchased Subaye securities within the Class Period, and you wish to discuss this investigation, or have any questions concerning this notice or your rights or interests with respect to these matters, please contact us.
MURRAY, FRANK & SAILER LLP