Tuya, Inc. (TUYA) Misled Investors in Connection With the Company’s IPO
A shareholder filed a class action on behalf of all persons or entities that purchased Tuya, Inc. (NYSE: TUYA) American Depository Shares (“ADSs”) in or traceable to the Company’s March 2021 initial public offering (“IPO”), for violations of the Securities Act of 1933. Tuya developed and offers a purpose-built “Internet of Things” (“IoTs”) cloud platform that delivers a suite of offerings, including Platform-as-a-Service, or PaaS, and Software-as-a-Service, or SaaS, to businesses and developers. The Company’s proprietary products and services enable so-called “smart devices,” e.g., household items and appliances connected to the internet, to communicate and interact with end users and online information and services.
According to the complaint, the offering documents in support of the IPO contained untrue statements of material fact. Leading up to the IPO, Tuya claimed to be experiencing phenomenal growth. Tuya claimed to be the “largest IoT PaaS business in the global market of IoT PaaS in terms of the volume of smart devices powered” and stated that its “business ha[d] scaled rapidly in recent periods,” growing revenue by 70% year-over-year to $179.9 million in 2020.
Tuya held its IPO in March 2021, selling over 45 million ADSs at $21 per ADS. However, unbeknownst to investors, a material portion of Tuya’s China-based customers were engaged in widespread illicit activities to misleadingly promote and sell their products on e-commerce marketplaces such as Amazon.com. Many of Tuya’s most significant customers were engaged in the systematic practice of writing fake reviews and paying for positive reviews, in direct violation of Amazon.com’s seller policies and practices. The ratings manipulation by a large contingent of Tuya’s customer base posed a significant undisclosed risk that Amazon.com would terminate or limit the sale of products containing Tuya’s technology on its platform, thereby materially negatively impacting the Company’s financial results. Further, on March 1, 2021, more than two weeks before the IPO, a data security organization, Safety Detectives, had recovered a database that exposed 13 million records of organized fake review scams linked to over 200,000 Amazon account profiles, many of which implicated Tuya’s clients.
Finally, Tuya announced its financial results for the second quarter of 2021 and a disappointing outlook for third quarter of 2021. By August 2022, Tuya ADSs had dropped below $2 per ADS, or 90% below the price at which they were sold to the investing public.
Next Steps: If you acquired shares of Tuya, Inc. pursuant to the Company’s IPO, you have until October 11, 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.