Shares of Gridsum Drop 16%; Investigation Begins
Gridsum Holding Inc. (Nasdaq: GSUM) closed at $6.12 per American depositary share today, 16 percent down, after the company's annual audit for 2016 was suspended as "unreliable" by its accounting firm, which snowballed into investigations by its investors.
Gridsum said that its independent registered public accountant, PricewaterhouseCoopers Zhong Tian LLP (PwC), informed the company last week of certain issues concerning "certain revenue recognition, cash flow, cost and expense items, and their underlying documentation" in the annual audit for 2017.
Particularly, PwC raised concern about the reported 2016 revenue and expense impacts.
As a result, several securities litigation and investor rights firms, including Levi & Korsinsky, Rosen Law Firm, and Block & Leviton, representing the investors of Gridsum, announced today they had initiated investigations into possible violation of federal securities laws by certain officers and directors of the company.
Gridsum said it formed an audit committee and involved external legal and accounting advisors who "are working diligently toward an expeditious conclusion of the investigation."
Filing of the 2017 annual report will be delayed until the review by Gridsum's audit committee is complete. The company gave no timing on the delay of its report and on the updates on the investigation.
"For many years, starting well before our IPO, we have been committed to transparency and good corporate governance, and remain so," said chief executive officer of Gridsum, Guosheng Qi. "I have full confidence in the integrity and professionalism of all parties involved [in the investigation], and we hope to report our results as soon as practicable after that work concludes."
The Beijing-based provider of analytics and artificial intelligence services reported four consecutive quarters of more than 40 percent revenue growth in its 2017 filings with the Securities and Exchange Commission.
Gridsum was the biggest loser at the list of companies CapitalWatch monitors after the company's stock fell nearly 50 percent to a record low of $3.68 per share in early trading on Monday.
Gridsum stock plummeted 50 percent, then closed at $6.12 per share Monday
(Source: Thomson Reuters Eikon)