Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 1 of 28 Page ID #:1
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`POMERANTZ LLP
`Jennifer Pafiti (SBN 282790)
`1100 Glendon Avenue, 15th Floor
`Los Angeles, CA 90024
`Telephone: (310) 405-7190
`Email: jpafiti@pomlaw.com
`
`Attorney for Plaintiff
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`[Additional Counsel on Signature Page]
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`
`NING WANG, Individually and on
`Behalf of All Others Similarly Situated,
`
`
`Plaintiff,
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`
`
`
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`v.
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`CHEETAH MOBILE, INC., SHENG
`FU, VINCENT ZHENYU JIANG,
`and THOMAS JINTAO REN,
`
`Defendants.
`
`
`
`Case No.
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`CLASS ACTION COMPLAINT
`FOR VIOLATIONS OF THE
`FEDERAL SECURITIES LAWS
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`JURY TRIAL DEMANDED
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 2 of 28 Page ID #:2
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`Plaintiff Ning Wang (“Plaintiff”), individually and on behalf of all others similarly
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`situated, by and through Plaintiff’s attorneys, alleges the following upon information and
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`belief, except as to those allegations concerning Plaintiff, which are alleged upon personal
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`knowledge. Plaintiff’s information and belief is based upon, among other things, its
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`counsel’s investigation, which includes without limitation: (a) review and analysis of
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`regulatory filings made by Cheetah Mobile, Inc. (“Cheetah Mobile” or the “Company”)
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`with the United States (“U.S.”) Securities and Exchange Commission (“SEC”); (b) review
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`and analysis of press releases and media reports issued by and disseminated by Cheetah
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`Mobile; and (c) review of other publicly available information concerning Cheetah
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`Mobile.
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`NATURE OF THE ACTION AND OVERVIEW
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`1.
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`This is a class action on behalf of persons and entities that purchased or
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`otherwise acquired Cheetah Mobile securities between March 25, 2019 and February 20,
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`2020, inclusive (the “Class Period”). Plaintiff pursues claims against the Defendants under
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`the Securities Exchange Act of 1934 (the “Exchange Act”).
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`2.
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`Cheetah Mobile is a mobile Internet company that offers mobile utility
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`products (such as Clean Master and Cheetah Keyboard), casual games (such as Piano Tiles
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`2, Bricks n Balls), and live streaming product Live.me. The Company provides its
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`advertising customers, which include direct advertisers and mobile advertising networks
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 3 of 28 Page ID #:3
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`through which advertisers place their advertisements, with direct access to highly targeted
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`mobile users and global promotional channels.
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`3.
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`On February 21, 2020, before the market opened, the Company disclosed that
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`its Google Play Store, Google AdMob, and Google AdManager accounts were disabled
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`on February 20, 2020 “because some of the Company’s apps had not been compliant with
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`Google policies, resulting in certain invalid traffic.”
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`4.
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`On this news, the Company’s share price fell $0.61 per share, or nearly 17%,
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`to close at $2.99 per share on February 21, 2020, on unusually heavy trading volume.
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`5.
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`Throughout the Class Period, Defendants made materially false and/or
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`misleading statements, as well as failed to disclose material adverse facts about the
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`Company’s business, operations, and prospects. Specifically, Defendants failed to
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`disclose to investors that: (i) certain of Cheetah Mobile’s apps were not compliant with
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`the terms of its agreements with Google; (ii) as a result, there was a reasonable likelihood
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`that Google would terminate its advertising contracts with the Company; (iii) as a result
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`of the foregoing, the Company’s ability to attract new users would be adversely impacted;
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`(iv) as a result, the Company’s revenue was reasonably likely to decline; and (v) as a result
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`of the foregoing, Defendants’ positive statements about the Company’s business,
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`operations, and prospects were materially misleading and/or lacked a reasonable basis.
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 4 of 28 Page ID #:4
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`6.
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`As a result of Defendants’ wrongful acts and omissions, and the precipitous
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`decline in the market value of the Company’s securities, Plaintiff and other Class members
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`have suffered significant losses and damages.
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`JURISDICTION AND VENUE
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`7.
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`The claims asserted herein arise under Sections 10(b) and 20(a) of the
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`Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder
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`by the SEC (17 C.F.R. § 240.10b-5).
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`8.
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`This Court has jurisdiction over the subject matter of this action pursuant to
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`28 U.S.C. § 1331 and Section 27 of the Exchange Act (15 U.S.C. § 78aa).
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`9.
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`Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b) and
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`Section 27 of the Exchange Act (15 U.S.C. § 78aa(c)). Substantial acts in furtherance of
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`the alleged fraud or the effects of the fraud have occurred in this Judicial District. Many
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`of the acts charged herein, including the dissemination of materially false and/or
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`misleading information, occurred in substantial part in this Judicial District.
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`10.
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`In connection with the acts, transactions, and conduct alleged herein,
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`Defendants directly and indirectly used the means and instrumentalities of interstate
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`commerce, including the U.S. mail, interstate telephone communications, and the facilities
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`of a national securities exchange.
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 5 of 28 Page ID #:5
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`PARTIES
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`11. Plaintiff, as set forth in the accompanying certification, incorporated by
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`reference herein, acquired Cheetah Mobile securities during the Class Period, and
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`suffered damages as a result of the federal securities law violations and false and/or
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`misleading statements and/or material omissions alleged herein.
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`12. Defendant Cheetah Mobile is incorporated under the laws of the Cayman
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`Islands with its principal executive offices located in Beijing, China. Cheetah Mobile’s
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`American Depositary Shares (“ADS” or “shares”) trade on New York Stock Exchange
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`(“NYSE”) under the symbol “CMCM.”
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`13. Defendant Sheng Fu (“Fu”) was the Company’s Chief Executive Officer at
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`all relevant times.
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`14. Defendant Vincent Zhenyu Jiang (“Jiang”) was the Company’s Chief
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`Financial Officer (“CFO”) from 2017 to January 31, 2020.
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`15. Defendant Thomas Jintao Ren (“Ren”) has been the Company’s CFO since
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`January 31, 2020.
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`16. Defendants Fu, Jiang, and Ren (collectively the “Individual Defendants”),
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`because of their positions with the Company, possessed the power and authority to control
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`the contents of the Company’s reports to the SEC, press releases and presentations to
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`securities analysts, money and portfolio managers and institutional investors, i.e., the
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`market. The Individual Defendants were provided with copies of the Company’s reports
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 6 of 28 Page ID #:6
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`and press releases alleged herein to be misleading prior to, or shortly after, their issuance
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`and had the ability and opportunity to prevent their issuance or cause them to be corrected.
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`Because of their positions and access to material non-public information available to
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`them, the Individual Defendants knew that the adverse facts specified herein had not been
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`disclosed to, and were being concealed from, the public, and that the positive
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`representations which were being made were then materially false and/or misleading. The
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`Individual Defendants are liable for the false statements pleaded herein.
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`SUBSTANTIVE ALLEGATIONS
`Background
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`17. Cheetah Mobile is a mobile Internet company that offers mobile utility
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`products (such as Clean Master and Cheetah Keyboard), casual games (such as Piano Tiles
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`2, Bricks n Balls), and live streaming product Live.me. The Company provides its
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`advertising customers, which include direct advertisers and mobile advertising networks
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`through which advertisers place their advertisements, with direct access to highly targeted
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`mobile users and global promotional channels.
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`Materially False and Misleading Statements Issued During the Class Period
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`18. The Class Period begins on March 25, 2019. On that day, Cheetah Mobile
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`announced its fourth quarter and full year 2018 financial results in a press release that
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`stated, in relevant part1:
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`Fiscal Year 2018 Results
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`1 Footnotes omitted.
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 7 of 28 Page ID #:7
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`REVENUES
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`Total revenues increased by 2.2% to RMB4,981.7 million (US$724.6 million)
`in 2018.
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`Revenues from utility products and related services decreased by 6.7%
`year over year to RMB3,119.5 million (US$453.7 million) in 2018. The
`decrease was due to (i) a decline in revenues from the Company’s mobile
`utility products and related services business in the overseas markets mostly
`as a result of the discontinuation of certain ad formats, i.e., ads on mobile
`phone lock screens, by the Company’s overseas third-party advertising
`partners, and (ii) a decline in the Company’s PC-related revenues. This
`decrease was largely offset by an increase in revenues from the mobile utility
`products and related services business in China. Revenues from utility
`products and related services in the domestic market increased by 22.3% year
`over year to RMB1,794.4 million (US$261.0 million) in 2018, accounting for
`36.0% of total revenues.
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`19. On April 26, 2019, Cheetah Mobile filed its annual report on Form 20-F for
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`the period ended December 31, 2018 with the SEC, affirming the previously reported
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`financial results. Moreover, regarding the Company’s relationship with Google, the
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`annual report stated, in relevant part:
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`Because a limited number of customers contribute to a significant portion
`of our revenues, our revenues and results of operations could be materially
`and adversely affected if we were to lose a significant customer or a
`significant portion of its business.
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`Currently, a limited number of customers contribute a significant portion of
`our revenues. Our customers primarily comprise mobile application
`developers, mobile game developers, mobile advertising networks, e-
`commerce companies and search engines to which we refer traffic and sell
`advertisements and individual customers. In 2016, 2017 and 2018, our five
`largest customers in aggregate contributed approximately 47.9%, 44.7% and
`41.3% of our revenues, respectively. Google became our largest customer
`since 2017, and contributed 14.4% of our total Revenues in 2018, compared
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 8 of 28 Page ID #:8
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`to 15.2% in 2017. We expect that a limited number of our customers will
`continue to contribute a significant portion of our revenues in the near future.
`If we lose any of these customers, or if revenues generated from a significant
`customer are substantially reduced due to, for example, increased
`competition, a significant change in the customer’s business policy or
`operation, suspected breach or violation to the underlying contract or policy,
`any deterioration in customer relationship, or significant delays in payments
`for our services, our business, financial condition and results of operations
`may be materially and adversely affected. For example, some of overseas
`business partners have discontinued the placement of ads on mobile phone
`lock screens since May 2017 and January 2018, respectively, which adversely
`affected our revenues from utility products and related services. In addition,
`on November 26, 2018, a third party made certain allegations about some of
`our products. Although we have made a number of public statements to clarify
`the matter, these allegations did cause a disruption to our business, and as a
`result, our revenues from utility products and related services decreased by
`6.3% quarter over quarter to RMB783.0 million (US$113.9 million) in the
`fourth quarter of 2018.
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`* * *
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`If major mobile application distribution channels change their standard terms
`and conditions in a manner that is detrimental to us, or terminate their existing
`relationship with us, our business, financial condition and results of operations
`may be materially and adversely affected.
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`We rely on third-party mobile application distribution channels such as
`Google Play and iOS App Store and various advertising platforms to distribute
`most of our mobile applications to users. In China, where Google Play is not
`available, we collaborate with similar local distribution channels to distribute
`our mobile applications. We expect a substantial number of downloads of our
`mobile applications will continue to be derived from these distribution
`channels. As such, the promotion, distribution and operation of our
`applications are subject to such distribution channels’ standard terms and
`policies for application developers, which are subject to the interpretation of,
`and frequent changes by, these distribution channels. If Google Play, iOS App
`Store or any other major distribution channel changes their standard terms and
`conditions in a manner that is detrimental to us, or terminate their existing
`relationship with us, our business, financial condition and results of operations
`may be materially and adversely affected.
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 9 of 28 Page ID #:9
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`Plainly, the foregoing risk warnings were generic “catch-all” provisions that were not
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`tailored to Cheetah Mobile’s actual known risks with respect to its apps’ non-compliance
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`with the terms of its agreements with Google.
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`20. On June 14, 2019, the Company announced its first quarter 2019 financial
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`results in a press release that stated, in relevant part:
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`First Quarter 2019 Consolidated Financial Results
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`REVENUES
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`Total revenues were RMB1,085.6 million (US$161.8 million) in the first
`quarter of 2019.
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`Revenues from utility products and related services decreased by 33.1%
`year over year to RMB497.9 million (US$74.2 million) in the first quarter of
`2019. The year-over-year decrease was primarily due to continuous
`disruptions to the Company’s overseas mobile utility business as a result of
`the negative publicity caused by a news article published in 2018.
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`21. On August 20, 2019, Cheetah Mobile announced its second quarter 2019
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`financial results in a press release that stated, in relevant part:
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`Second Quarter 2019 Consolidated Financial Results
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`REVENUES
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`Total revenues were RMB970.1 million (US$141.3 million) in the second
`quarter of 2019, decreasing by 12.1% year over year.
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`Revenues from utility products and related services decreased by 44.0%
`year over year to RMB423.5 million (US$61.7 million) in the second quarter
`of 2019. This year-over-year decrease was primarily due to the slowdown of
`the Company’s overseas mobile utility business, resulting from the negative
`publicity caused by a news article from 2018, and the softness of the domestic
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 10 of 28 Page ID #:10
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`advertising industry in 2019.
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`22. On November 13, 2019, Cheetah Mobile announced its third quarter 2019
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`financial results in a press release that stated, in relevant part:
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`Third Quarter 2019 Consolidated Financial Results
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`REVENUES
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`Total revenues were RMB919.9 million (US$128.7million) in the third
`quarter of 2019, decreasing by 32.0% year over year.
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`Revenues from the mobile entertainment business increased by 6.9% year
`over year to RMB532.2 million (US$74.5million) in the third quarter of 2019.
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`Revenues from the mobile games business increased by 4.2% year over year
`to RMB297.2 million (US$41.6 million) in the third quarter of 2019. This
`increase was mainly attributable to the continued growth of Bricks n Balls.
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`23. The above statements identified in ¶¶ 18-22 were materially false and/or
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`misleading and failed to disclose material adverse facts about the Company’s business,
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`operations, and prospects. Specifically, Defendants failed to disclose to investors that: (i)
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`certain of Cheetah Mobile’s apps were not compliant with the terms of its agreements with
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`CLASS ACTION COMPLAINT
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`Revenues from LiveMe increased by 10.6% year over year to
`RMB235.0 million (US$32.9 million) in the third quarter of 2019. The
`increase was primarily driven by higher average revenue per paying
`user.
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`Revenues from utility products and related services decreased by 57.8%
`year over year to RMB352.9 million (US$49.4 million) in the third
`quarter of 2019. This year-over-year decrease was primarily due to the
`slowdown of activity in overseas markets for the Company’s mobile
`utility product business. Continuous headwinds in the domestic online
`advertising market in 2019 also contributed to this decrease.
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`•
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 11 of 28 Page ID #:11
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`Google; (ii) as a result, there was a reasonable likelihood that Google would terminate its
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`advertising contracts with the Company; (iii) as a result of the foregoing, the Company’s
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`ability to attract new users would be adversely impacted; (iv) as a result, the Company’s
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`revenue was reasonably likely to decline; and (v) as a result of the foregoing, Defendants’
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`positive statements about the Company’s business, operations, and prospects were
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`materially misleading and/or lacked a reasonable basis.
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`The Truth Emerges
`24. On February 21, 2020, before the market opened, the Company disclosed that
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`its Google Play Store, Google AdMob, and Google AdManager accounts were disabled
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`on February 20, 2020 “because some of the Company’s apps had not been compliant with
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`Google policies, resulting in certain invalid traffic.” Specifically, in a press release,
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`Cheetah Mobile stated, in relevant part:
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`Cheetah Mobile Inc. (NYSE: CMCM) (“Cheetah Mobile” or the “Company”),
`a leading mobile internet company with global market coverage, today
`announced that it has been informed by Google that the Company’s Google
`Play Store, Google AdMob and Google AdManager accounts have been
`disabled on February 20, 2020, and the associated contracts will be
`terminated.
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`Pending the restoration of Google collaboration, the Company expects its
`ability to attract new users and generate revenue from Google may be
`materially adversely affected from February 2020. In the first nine months
`of 2019, Cheetah Mobile generated 22.6% of its total revenues from Google,
`including revenues from the mobile advertising business and revenues from
`the purchase and consumption of virtual items by users via Google as a
`channel.
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`According to Google, the decision was made because some of the
`Company’s apps had not been compliant with Google policies, resulting in
`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 12 of 28 Page ID #:12
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`certain invalid traffic. The Company is in continuous communication with
`Google to appeal the decision, clarify any misunderstanding, and adopt any
`requisite remedial measures to restore the disabled accounts. However, the
`appealing process could be time-consuming, and the Company cannot
`guarantee that its appeals will be successful.
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`Cheetah Mobile remains committed to upholding the high standards in the
`industry and complying with Google Play developer policies, GDPR, laws,
`and regulations. The Company’s priority has always been to protect the
`interests of its users and enhance the user experience.
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`25. On this news, the Company’s share price fell $0.61 per share, or nearly 17%,
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`to close at $2.99 per share on February 21, 2020, on unusually heavy trading volume.
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`
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`CLASS ACTION ALLEGATIONS
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`26. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
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`Procedure 23(a) and (b)(3) on behalf of a class, consisting of all persons and entities that
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`purchased or otherwise acquired Cheetah Mobile securities during the Class Period, and
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`who were damaged thereby (the “Class”). Excluded from the Class are Defendants, the
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`officers and directors of the Company, at all relevant times, members of their immediate
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`families and their legal representatives, heirs, successors, or assigns, and any entity in
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`which Defendants have or had a controlling interest.
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`27. The members of the Class are so numerous that joinder of all members is
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`impracticable. Throughout the Class Period, Cheetah Mobile’s shares actively traded on
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`the NYSE. While the exact number of Class members is unknown to Plaintiff at this time
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`and can only be ascertained through appropriate discovery, Plaintiff believes that there are
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`at least hundreds or thousands of members in the proposed Class. Millions of Cheetah
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 13 of 28 Page ID #:13
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`Mobile shares were traded publicly during the Class Period on the NYSE. Record owners
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`and other members of the Class may be identified from records maintained by Cheetah
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`Mobile or its transfer agent and may be notified of the pendency of this action by mail,
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`using the form of notice similar to that customarily used in securities class actions.
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`28. Plaintiff’s claims are typical of the claims of the members of the Class as all
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`members of the Class are similarly affected by Defendants’ wrongful conduct in violation
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`of federal law that is complained of herein.
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`29. Plaintiff will fairly and adequately protect the interests of the members of the
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`Class and has retained counsel competent and experienced in class and securities litigation.
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`30. Common questions of law and fact exist as to all members of the Class and
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`predominate over any questions solely affecting individual members of the Class. Among
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`the questions of law and fact common to the Class are:
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`(a) whether the federal securities laws were violated by Defendants’ acts
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`as alleged herein;
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`(b) whether statements made by Defendants to the investing public during
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`the Class Period omitted and/or misrepresented material facts about the business,
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`operations, and prospects of Cheetah Mobile; and
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`(c)
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`to what extent the members of the Class have sustained damages and
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`the proper measure of damages.
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`31. A class action is superior to all other available methods for the fair and
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 14 of 28 Page ID #:14
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`efficient adjudication of this controversy since joinder of all members is impracticable.
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`Furthermore, as the damages suffered by individual Class members may be relatively
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`small, the expense and burden of individual litigation makes it impossible for members of
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`the Class to individually redress the wrongs done to them. There will be no difficulty in
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`the management of this action as a class action.
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`UNDISCLOSED ADVERSE FACTS
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`32. The market for Cheetah Mobile’s securities was open, well-developed and
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`efficient at all relevant times. As a result of these materially false and/or misleading
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`statements, and/or failures to disclose, Cheetah Mobile’s securities traded at artificially
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`inflated prices during the Class Period. Plaintiff and other members of the Class purchased
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`or otherwise acquired Cheetah Mobile’s securities relying upon the integrity of the market
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`price of the Company’s securities and market information relating to Cheetah Mobile, and
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`have been damaged thereby.
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`33. During the Class Period, Defendants materially misled the investing public,
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`thereby inflating the price of Cheetah Mobile’s securities, by publicly issuing false and/or
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`misleading statements and/or omitting to disclose material facts necessary to make
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`Defendants’ statements, as set forth herein, not false and/or misleading. The statements
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`and omissions were materially false and/or misleading because they failed to disclose
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`material adverse information and/or misrepresented the truth about Cheetah Mobile’s
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`business, operations, and prospects as alleged herein.
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 15 of 28 Page ID #:15
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`34. At all relevant times, the material misrepresentations and omissions
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`particularized in this Complaint directly or proximately caused or were a substantial
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`contributing cause of the damages sustained by Plaintiff and other members of the Class.
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`As described herein, during the Class Period, Defendants made or caused to be made a
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`series of materially false and/or misleading statements about Cheetah Mobile’s financial
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`well-being and prospects. These material misstatements and/or omissions had the cause
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`and effect of creating in the market an unrealistically positive assessment of the Company
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`and its financial well-being and prospects, thus causing the Company’s securities to be
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`overvalued and artificially inflated at all relevant times. Defendants’ materially false
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`and/or misleading statements during the Class Period resulted in Plaintiff and other
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`members of the Class purchasing the Company’s securities at artificially inflated prices,
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`thus causing the damages complained of herein when the truth was revealed.
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`LOSS CAUSATION
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`35. Defendants’ wrongful conduct, as alleged herein, directly and proximately
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`caused the economic loss suffered by Plaintiff and the Class.
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`36. During the Class Period, Plaintiff and the Class purchased Cheetah Mobile’s
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`securities at artificially inflated prices and were damaged thereby. The price of the
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`Company’s securities significantly declined when the misrepresentations made to the
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`market, and/or the information alleged herein to have been concealed from the market,
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`and/or the effects thereof, were revealed, causing investors’ losses.
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 16 of 28 Page ID #:16
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`SCIENTER ALLEGATIONS
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`37. As alleged herein, Defendants acted with scienter since Defendants knew
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`that the public documents and statements issued or disseminated in the name of the
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`Company were materially false and/or misleading; knew that such statements or
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`documents would be issued or disseminated to the investing public; and knowingly and
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`substantially participated or acquiesced in the issuance or dissemination of such
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`statements or documents as primary violations of the federal securities laws. As set forth
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`elsewhere herein in detail, the Individual Defendants, by virtue of their receipt of
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`information reflecting the true facts regarding Cheetah Mobile, their control over, and/or
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`receipt and/or modification of Cheetah Mobile’s allegedly materially misleading
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`misstatements and/or their associations with the Company which made them privy to
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`confidential proprietary information concerning Cheetah Mobile, participated in the
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`fraudulent scheme alleged herein.
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`APPLICABILITY OF PRESUMPTION OF RELIANCE
`(FRAUD-ON-THE-MARKET DOCTRINE)
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`38. The market for Cheetah Mobile’s securities was open, well-developed and
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`efficient at all relevant times. As a result of the materially false and/or misleading
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`statements and/or failures to disclose, Cheetah Mobile’s securities traded at artificially
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`inflated prices during the Class Period. On March 25, 2019, the Company’s share price
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`closed at a Class Period high of $7.01 per share. Plaintiff and other members of the Class
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`purchased or otherwise acquired the Company’s securities relying upon the integrity of
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`CLASS ACTION COMPLAINT
`15
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 17 of 28 Page ID #:17
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`the market price of Cheetah Mobile’s securities and market information relating to
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`Cheetah Mobile, and have been damaged thereby.
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`39. During the Class Period, the artificial inflation of Cheetah Mobile’s shares
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`was caused by the material misrepresentations and/or omissions particularized in this
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`Complaint causing the damages sustained by Plaintiff and other members of the Class. As
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`described herein, during the Class Period, Defendants made or caused to be made a series
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`of materially false and/or misleading statements about Cheetah Mobile’s business,
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`prospects, and operations. These material misstatements and/or omissions created an
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`unrealistically positive assessment of Cheetah Mobile and its business, operations, and
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`prospects, thus causing the price of the Company’s securities to be artificially inflated at
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`all relevant times, and when disclosed, negatively affected the value of the Company
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`shares. Defendants’ materially false and/or misleading statements during the Class Period
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`resulted in Plaintiff and other members of the Class purchasing the Company’s securities
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`at such artificially inflated prices, and each of them has been damaged as a result.
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`40. At all relevant times, the market for Cheetah Mobile’s securities was an
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`efficient market for the following reasons, among others:
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`(a) Cheetah Mobile shares met the requirements for listing, and were listed
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`and actively traded on the NYSE, a highly efficient and automated market;
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`(b) As a regulated issuer, Cheetah Mobile filed periodic public reports
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`with the SEC and/or the NYSE;
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`CLASS ACTION COMPLAINT
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`Case 2:20-cv-06896 Document 1 Filed 07/31/20 Page 18 of 28 Page ID #:18
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`(c) Cheetah Mobile regularly communicated with public investors via
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`established market communication mechanisms, including through regular dissemination
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`of press releases on the national circuits of major newswire services and through other
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`wide-ranging public disclosures, such as communications with the financial press and
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`other similar reporting services; and/or
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`(d) Cheetah Mobile was followed by securities analysts employed by
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`brokerage firms who wrote reports about the Company, and these reports were distributed
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`to the sales force and certain customers of their respective brokerage firms. Each of these
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`reports was publicly available and entered the public marketplace.
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`41. As a result of the foregoing, the market for Cheetah Mobile’s securities
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`promptly digested current information regarding Cheetah Mobile from all publicly
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`available sources and reflected such information in Cheetah Mobile’s share price. Under
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`these circumstances, all purchasers of Cheetah Mobile’s securities during the Class Period
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`suffered similar injury through their purchase of Cheetah Mobile’s securities at artificially
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`inflated prices and a presumption of reliance applies.
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`42. A Class-wide presumption of reliance is also appropriate in this action under
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`the Supreme Court’s holding in Affiliated Ute Citizens of