GDS Holdings Limited (GDS) Accused of Fraudulent Behavior

According to the recently filed complaint, the Prospectus GDS Holdings Limited (GDS) filed for its IPO stated that "net revenue and results of operations are largely determined by the degree to which data center space is committed or pre-committed as well as its utilization" and noted improved commitment and utilization rates between 2014 and 2016. Subsequent annual reports touted high utilization rates and 100% commitment rates.

On July 31, 2018, Blue Orca Capital published a report stating that "GDS is borrowing crippling amounts of debt to enrich insiders by acquiring data centers from undisclosed related parties which are not nearly as valuable as the Company claims." The report described four categories of GDS's alleged fraudulent practices: (i) misleading the investing public with respect to the occupancy and utilization rates of a key operating center; (ii) paying inflated purchase prices for related party transactions; (iii) suspicious "serial" equity and debt raisings, despite the company's apparent strong cash position; and (iv) suspect accounts receivable and payable practices.

On this news, GDS's ADS price fell $13.42 per share, or over 38% to close at $21.83 per share on July 31, 2018.

GDS Shareholders Have Legal Options

Concerned shareholders who would like more information about their rights and potential remedies can please send us a message via the Shareholder Information form below.