Class action filed against AirMedia after allegedly false valuation

A law firm recently announced it has filed a class action claim against a holding company that operates out-of-home advertising platforms in China.

The securities class action filed against AirMedia Group Inc. was commenced in the United States District Court for the Southern District of New York on behalf of investors who purchased the company’s American Depositary Receipts during the class period between April 15, 2015 and June 15, 2015. The company offers standalone and TV-attached digital frames, according to Insider Trading Report. The standalone frames display advertisements on vertical or horizontal panels that range from 40 to 108 inches.

AirMedia offers digital frames for advertising in airports and beyond
The company operates digital frames in airports throughout China. Beijing Capital International airport, Guangzhou Baiyun International airport, Shanghai Pudong International airport, Shanghai Hongqiao International airport, Chengdu Shuangliu International airport and Shenzhen Baoan International airport are six of the locations that house the digital frames. In addition, the company’s products can be found in 30 more airports outside of China. The business also offers outdoor media displays such as billboards, painted advertisements and light boxes outside of the air-travel industry.

“False and misleading statements were made about the valuation of the subsidiary.”

Class action claims false and misleading statements on subsidiary valuation
The class action suit alleges that AirMedia, as well as some of its officers and directors, made false and misleading statements regarding the sale of interest in a subsidiary, in violation of the Securities Exchange Act of 1934. The claim explains that the statements in question were made regarding the sale of 5 percent interest in the company’s advertising subsidiary, AirMedia Group Co., Ltd. , to Shenzhen Liantronics Co. Ltd. The false and misleading statements were made about the valuation of the subsidiary.

The company issued a press release noting that the total valuation for the advertising subsidiary was $500 million. The defendants allege that additional statements were made claiming that the valuation of the subsidiary was $500 million. As a result of the false valuations, AirMedia traded at artificially inflated prices – as high as $7.70 per ADR – on June 15, 2015.

Later on the same day, the company issued another press release stating that it had entered into an agreement to sell a 75 percent equity interest in the advertising subsidiary to Beijing Longde Wenchuang Fund Management Co., Ltd. for $344.4 million, much less than the original valuation. On this news, AirMedia ADR prices fell over 50 percent over the next two days.

Over the past week, shares in the company have dropped 5.18 percent, and 24.92 percent through the last four weeks, according to Insider Trading Report. At the end of the day last Friday, share prices in the company were down amid volatile trading. That day shares closed down 2.46 percent at $4.76. The news source warned investors to look out for further signals and trade with caution.