Laid-off employees and investors are suing collapsed Chinese grocery delivery company Missfresh and the Wall Street underwriters who marketed its shares in a $300mn New York offering last year over unpaid salaries and alleged violation of securities laws.
Missfresh pioneered speedy grocery delivery in China, raising more than $1bn in cash from investors including tech-focused funds run by Tiger Global and Goldman Sachs, to reach a $3bn IPO valuation.
Executives claimed its mini-warehouses and pink-clad riders could make 30-minute grocery delivery profitable, but the company was hobbled by Beijing’s crackdown on the technology sector, slowing economic growth in China and waning investor appetite for funding its losses.
After running out of cash last week and laying off most of its staff, Missfresh’s app was no longer taking orders as of Tuesday in Beijing. The company’s Nasdaq-listed stock has plunged from $13 a share at its listing price last June to 10 cents.
Hundreds of Missfresh employees have filtered into labour arbitration courts in Beijing and Shanghai to sue the company over unpaid salaries and lost severance, which is guaranteed under Chinese labour law.
Missfresh has since May failed to make mandatory health insurance and other social benefit payments for its staff and still owes salaries from June and July, multiple employees told the Financial Times.
“I think chances are extremely slim that I can get my salary back,” said a former administration employee surnamed Hu. “But I will still go to arbitration, it’s my right.”
Hu rushed to Missfresh’s Beijing office last week after hearing of the cash shortage. “They are not paying me, so I’m taking my computer,” Hu told the FT on entering the office. Reached later by phone, Hu said they had decided against taking the company computer.
Investors in the US have sued Missfresh, its executives and Wall Street banks for damages for bringing the company to market just over 12 months ago.
The complaint, filed in US district court in New York last month, alleged Missfresh provided false financial figures in its IPO prospectus and that underwriters, including JPMorgan and Citigroup, promoted and sold its shares based on a “defective prospectus”.
The suit alleged the underwriters did not do adequate due diligence and reaped millions of dollars in fees from the listing. During the Missfresh roadshow, underwriters “presented highly favourable information about the company”, the suit alleged.
Plaintiff Juan Chen invested $68,000 in Missfresh shares in June and July last year and lost most of his money, the complaint said.
Missfresh said in an SEC filing last month that prior financial statements had overstated revenues, including in the quarter leading up to its IPO, and blamed rogue employees who created “questionable transactions” that bolstered sales figures.
Last week, Missfresh said it intended to pay employees overdue salaries but lacked the cash after a financing deal with a coal mining group fell through.
“I don’t hold out much hope of getting the money,” said a former employee in Missfresh’s fast delivery unit. “I would be satisfied if founder Xu Zheng could share just one square metre of his mansion with me.”
Unpaid suppliers occupying Missfresh’s Beijing office said they have been unable to locate chief executive Xu for weeks.
Over the weekend, Xu told local media that “in recent days, I’ve been busy dealing with urgent matters” in an effort to refute rumours that he had fled to Hong Kong.
Chen could not be reached for comment. The Rosen Law Firm, representing Chen, declined to comment, as did Citigroup and Xu. JPMorgan did not immediately respond to a request for comment.
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