Dingdong Ltd. (DDL) Misrepresented the Quality of its Food Products
A shareholder filed a class action on behalf of all persons who purchased or otherwise acquired Dingdong Ltd. (NYSE: DDL) American Depository Shares (“ADS”) pursuant or traceable to the Company’s June 2021 initial public offering (“IPO”), for violations of the Securities Act of 1933. Dingdong purports to be a leading and the fastest growing on-demand e-commerce company in China.
According to the complaint, in June 2021, defendants issued approximately 4.07 million ADS to the investing public at $23.50 per ADS, all pursuant to the Registration Statement.
According to the Registration Statement, Dingdong’s mission is to “make fresh groceries as available as running water to every household.” To achieve this end, Dingdong has purportedly “embraced a user-centric philosophy” that is committed to “directly providing users and households . . . fresh produce, meat and seafood and other daily necessities through a convenient and excellent shopping experience supported by an extensive self-operated frontline fulfillment grid.” Critically, Dingdong differentiates itself from its competitors by claiming to “procure . . . products primarily from direct upstream sources such as farms and cooperatives,” “apply stringent quality control across [its] entire supply chain to ensure product quality to [its] users,” and rely on its “frontline fulfillment grid and robust, digitalized fulfillment capabilities . . . [to] deliver . . . orders within 30 minutes.”
Unbeknownst to prospective investors, however, the Registration Statement misrepresented Dingdong’s commitment to ensuring the safety and quality of the food it distributes to the market. In fact, Dingdong was actively flouting its food safety responsibilities, by selling, for example, dead fish to customers while marketing it as live fish and recycling vegetables that were past their sell-by date. These issues were occurring with enough frequency that Chinese regulators began scrutinizing Dingdong’s supply chain inputs, including its own facilities, which was likely to (and did) negatively impact Dingdong’s business, operations, and reputation.
Soon the media began reporting on the issues. On March 17, 2022, a Beijing News published a report stating that Chinese regulators launched a probe into the Company for food safety violations uncovered by the local news. According to the report, “Dingdong replaced labels on expired vegetables and sold frozen fish products as fresh.” On this news, the price of Dingdong’s ADS declined over 10.8%, to close at $3.79 per ADS on March 17, 2022. By the commencement of the class action, Dingdong’s shares traded as low as $2.51 per ADS, representing a decline of over 89% from the $23.50 IPO offering price.
Next Steps: If you acquired shares of Dingdong Ltd. pursuant to the Company’s IPO, you have until October 25, 2022, to ask the court to appoint you lead plaintiff for the class. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. You do not have to participate in the case to be eligible for a recovery.
All representation is on a contingency fee basis. Shareholders pay no fees or expenses.