Pomerantz LLP secured a $29.75 million settlement on behalf of investors in Qihoo 360 Technology Co. Ltd.

Pomerantz LLP secured a $29.75 million settlement on behalf of investors in the Chinese Internet security company, Qihoo 360 Technology Co. Ltd. (Qihoo). The United States District Court for the Southern District of New York granted final approval to the settlement on August 1, 2024.

The securities class action arose after a group that included some top executives at Qihoo paid shareholders $9.3 billion in a 2016 buyout only to relist on the Shanghai Stock Exchange in early 2018 with a first-day market capitalization of $62 billion. Complainants alleged that the company misled them about its relisting plan when it went private, and that it manipulated share prices in order to pay a lower price on the buyout.

The district court applied an overly demanding standard to conclude that the complaint did not plead a false and misleading statement because it did not adequately allege a “concrete and definite” relisting plan at the time of the buyout, despite the multiple sources of evidence supporting the allegation that the buyers had precisely that plan.

Pomerantz won an important victory for investors at the Second Circuit, which vacated the district court’s ruling, explaining that the lower court improperly discounted the evidence showing that a relisting plan existed at the time of the buyout. This evidence includes news articles referencing materials provided to investors in the privatization that discussed the relisting plan, an expert’s analysis of the amount of time it takes to plan for a backdoor listing in China, and information from a confidential witness who was at a meeting with one of the defendants.

Partner Michael Grunfeld who led the litigation, stated, “We are happy to obtain this great recovery for the class after over five years of litigation that involved complicated legal issues and significant challenges along the way.”

The settlement class includes shareholders who either sold their shares during the class period or tendered their shares in the merger.