Case 1:22-cv-07273-VSB Document 1 Filed 08/25/22 Page 1 of 24
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`RYAN MCCORMACK, Individually and on
`Behalf of All Others Similarly Situated,
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`Case No.
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`v.
`
`Plaintiff,
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`CLASS ACTION COMPLAINT FOR
`VIOLATIONS OF THE SECURITIES
`ACT OF 1933
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`JURY TRIAL DEMANDED
`
`DINGDONG (CAYMAN) LTD., CHANGLIN
`LIANG, LE YU, YI DING, ERIC CHI ZHANG,
`WEILI HONG, PHILIP WAI LAP LEUNG,
`COLLEEN A. DE VRIES, MORGAN
`STANLEY & CO. LLC, BOFA SECURITIES,
`INC., CREDIT SUISSE SECURITIES (USA)
`LLC, MISSION CAPITAL MANAGEMENT
`LIMITED, HSBC SECURITIES (USA) INC.,
`FUTU INC., TIGER BROKERS (NZ) LIMITED,
`and COGENCY GLOBAL INC.,
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`Defendants.
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`Plaintiff Ryan McCormack (“Plaintiff”), individually and on behalf of all others similarly
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`situated, by Plaintiff’s undersigned attorneys, alleges the following based upon personal
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`knowledge as to Plaintiff and Plaintiff’s own acts, and upon information and belief as to all other
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`matters, based on the investigation conducted by and through Plaintiff’s attorneys, which included,
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`among other things, a review of U.S. Securities and Exchange Commission (“SEC”) filings by
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`Dingdong (Cayman) Ltd. (“Dingdong” or the “Company”), articles, and other publications,
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`including media and analyst reports about the Company and Company press releases. Plaintiff
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`believes that substantial additional evidentiary support will exist for the allegations set forth herein.
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`NATURE AND SUMMARY OF THE ACTION
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`1.
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`Plaintiff brings this securities class action on behalf of persons who purchased, or
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`otherwise acquired, Dingdong American Depository Shares (“ADS”) pursuant or traceable to the
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`F-1 registration statements (including all amendments made thereto) and related prospectus on
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`Case 1:22-cv-07273-VSB Document 1 Filed 08/25/22 Page 2 of 24
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`Form 424B4 (collectively, the “Registration Statement” or “Offering Documents”) issued in
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`connection with Dingdong’s June 2021 initial public stock offering (the “IPO” or the “Offering”).
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`2.
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`This action asserts non-fraud, strict liability claims under §§11, 12, and 15 of the
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`Securities Act of 1933 (the “Securities Act”), against Dingdong, certain Dingdong officers and
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`directors, the underwriters of the IPO, and Dingdong’s U.S. representatives (collectively, the
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`“Defendants”).
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`3.
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`Dingdong purports to be a leading and the fastest growing on-demand e-commerce
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`company in China. Dingdong conducted its IPO in New York, and its ADS are listed on the New
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`York Stock Exchange (“NYSE”) under the ticker symbol “DDL.”
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`4.
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`In June 2021, as part of Dingdong’s IPO, Defendants issued approximately 4.07
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`million ADS to the investing public at $23.50 per ADS, all pursuant to the Registration Statement.
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`5.
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`According to the Registration Statement, Dingdong’s mission is to “make fresh
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`groceries as available as running water to every household.” To achieve this end, Dingdong has
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`purportedly “embraced a user-centric philosophy” that is committed to “directly providing users
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`and households . . . fresh produce, meat and seafood and other daily necessities through a
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`convenient and excellent shopping experience supported by an extensive self-operated frontline
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`fulfillment grid.” [Emphasis added.] Critically, Dingdong differentiates itself from its competitors
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`by claiming to “procure . . . products primarily from direct upstream sources such as farms and
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`cooperatives,” “apply stringent quality control across [its] entire supply chain to ensure product
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`quality to [its] users,” and rely on its “frontline fulfillment grid and robust, digitalized fulfillment
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`capabilities . . . [to] deliver . . . orders within 30 minutes.” [Emphasis added.] Indeed, at the time
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`of the IPO, they were these very capabilities that the Offering Documents cited as the reasons why
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`Dingdong achieved “significant scale in [the] industry,” and observed a “strong and active user
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`base” that saw “increasing engagement and stickiness.”
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`6.
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`Unbeknownst to prospective investors, however, the Registration Statement
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`misrepresented Dingdong’s commitment to ensuring the safety and quality of the food it distributes
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`to the market. In fact, Dingdong was actively flouting its food safety responsibilities, selling, for
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`example, dead fish to customers while marketing it as live fish and recycling vegetables that were
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`past their sell-by date. In other words, Dingdong was no better at providing or assuring access to
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`“fresh” groceries than the supermarkets, traditional Chinese wet markets, or traditional e-
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`commerce platforms it repeatedly claimed to be displacing. The foregoing conduct subjected
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`Dingdong to an increased risk of regulatory and/or governmental scrutiny and enforcement, all of
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`which, once revealed, were likely to (and did) negatively impact Dingdong’s business, operations,
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`and reputation. By omitted these facts, Plaintiff and other ADS purchasers were unable to
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`adequately assess the value of the shares offered in connection with the IPO, and thus purchased
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`their ADS without material information and to their detriment.
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`7.
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`With these material omissions and misrepresentations in the Registration
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`Statement, Defendants went forward with the IPO, raising nearly $95.7 million in gross proceeds.
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`8.
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`As a result of Defendants’ wrongful acts and omissions, and the precipitous decline
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`in the market value of the Company’s securities that results as investors learned of Defendants’
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`wrongdoing, Plaintiff and other Class members have suffered tens of millions of dollars in
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`damages.
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`JURISDICTION AND VENUE
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`9.
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`The claims asserted herein arise under and pursuant to §§11, 12, and 15 of the
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`Securities Act, 15 U.S.C. §§77k, 77l(a)(2), and 77o.
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`10.
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`This Court has jurisdiction over this action pursuant to §22 of the Securities Act,
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`15 U.S.C. §77v, and 28 U.S.C. §1331.
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`11.
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`Venue is properly laid in this District pursuant to §22 of the Securities Act and 28
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`U.S.C. §1391(b). Many of the acts and transactions that constitute violations of law complained
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`of herein, including the dissemination to the public of untrue statements of material facts, occurred
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`in this District. Dingdong’s ADS are listed on the NYSE, a national securities exchange, located
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`in this District.
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`12.
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`In connection with the acts, conduct, and other wrongs alleged in this Complaint,
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`Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,
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`including, but not limited to, the U.S. mail, interstate telephone communications, and facilities of
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`the national securities exchange.
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`Plaintiff
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`THE PARTIES
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`13.
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`As set forth in the attached Certification, Plaintiff purchased the Company’s ADS
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`that were issued pursuant and traceable to the Registration Statement and IPO, and was damaged
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`thereby.
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`Defendants
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`A.
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`14.
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`Dingdong
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`Defendant Dingdong is a China-based “fresh” grocery e-commerce company.
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`Dingdong conducted its IPO in New York, and its ADS are listed on the NYSE under the ticker
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`symbol “DDL.”
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`B.
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`15.
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`The Individual Defendants
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`Defendant Changlin Liang (“Liang”) serves, and has served at all relevant times, as
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`a director on Dingdong’s Board of Directors (the “Board”), Founder, and Dingdong’s Chief
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`4
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`Case 1:22-cv-07273-VSB Document 1 Filed 08/25/22 Page 5 of 24
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`Executive Officer. Defendant Liang reviewed, contributed to, and signed, or caused the signing
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`of, the Offering Documents.
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`16.
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`Defendant Le Yu (“Yu”) serves, and has served at all relevant times, as a director
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`on Dingdong’s Board and as Dingdong’s Chief Strategy Officer. Defendant Yu reviewed,
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`contributed to, and signed, or caused the signing of, the Offering Documents.
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`17.
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`Yi Ding (“Ding”) serves, and has served at all relevant times, as a director on
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`Dingdong’s Board and as Dingdong’s Vice President. Defendant Ding reviewed, contributed to,
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`and signed, or caused the signing of, the Offering Documents.
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`18.
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`Eric Chi Zhang (“Zhang”) serves, and has served at all relevant times, as a director
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`on Dingdong’s Board. Defendant Zhang reviewed, contributed to, and signed, or caused the
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`signing of, the Offering Documents.
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`19.
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`Defendant Weili Hong (“Hong”) serves as a director on Dingdong’s Board, having
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`accepted an appointment effective upon the SEC’s declaration of the effectiveness of Dingdong’s
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`Registration Statement. Defendant Hong reviewed and contributed to the Offering Documents.
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`20.
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`Defendant Philip Wai Lap Leung (“Leung”) serves as a director on Dingdong’s
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`Board, having accepted an appointment effective upon the SEC’s declaration of the effectiveness
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`of Dingdong’s Registration Statement. Defendant Leung reviewed and contributed to the Offering
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`Documents.
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`21.
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`Defendant Colleen A. De Vries (“De Vries”) served as Senior Vice President of
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`Defendant Cogency Global Inc. (“Cogency Global”), the designated U.S. representative of
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`Defendant Dingdong, and reviewed, contributed to, signed, or caused the signing of, the Offering
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`Documents.
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`22.
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`Defendants named in ¶¶15-21 above are collectively referred to herein as the
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`“Individual Defendants.” The Individual Defendants each reviewed, contributed to, signed, or
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`authorized the signing of, the Offering Documents, solicited the investing public to purchase
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`securities issued pursuant thereto, hired and assisted the underwriters, planned and contributed to
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`the Offering and the Offering Documents, and/or attended or contributed to road shows and other
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`promotions to meet with and present favorable information to Dingdong investors, all motivated
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`by their own and the Company’s financial interests.
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`C.
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`23.
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`The Underwriter Defendants
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`The following underwriters were also instrumental in soliciting and making the
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`securities in the Offering available to the investing public:
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`Morgan Stanley & Co. LLC
`BofA Securities, Inc.
`Credit Suisse Securities (USA) LLC
`Mission Capital Management Limited
`HSBC Securities (USA) Inc.
`Futu Inc.
`Tiger Brokers (NZ) Limited
`
`1,221,600
`1,068,900
`763,500
`1,017,700
`100
`100
`100
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`24.
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`Defendant Morgan Stanley & Co. LLC (“Morgan Stanley”) was an underwriter for
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`the Offering, serving as a financial advisor for and assisting in the preparation and dissemination
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`of the Company’s false and misleading Offering Documents. Morgan Stanley served as a joint
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`bookrunner of the Offering, and as a representative of all the underwriters. Morgan Stanley also
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`participated in conducting and promoting the Offering. Morgan Stanley’s participation in the
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`solicitation of the Offering was motivated by its financial interest. Defendant Morgan Stanley
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`maintains an office in New York, NY.
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`25.
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`Defendant BofA Securities, Inc. (“BofA”) was an underwriter for the Offering,
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`serving as a financial advisor for and assisting in the preparation and dissemination of the
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`Company’s false and misleading Offering Documents. BofA served as a joint bookrunner of the
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`Case 1:22-cv-07273-VSB Document 1 Filed 08/25/22 Page 7 of 24
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`Offering, and as a representative of all the underwriters. BofA also participated in conducting and
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`promoting the Offering. BofA’s participation in the solicitation of the Offering was motivated by
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`its financial interest. Defendant BofA maintains an office in New York, NY.
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`26.
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`Defendant Credit Suisse Securities (USA) LLC (“Credit Suisse”) was an
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`underwriter for the Offering, serving as a financial advisor for and assisting in the preparation and
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`dissemination of the Company’s false and misleading Offering Documents. Credit Suisse served
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`as a joint bookrunner of the Offering, and as a representative of all the underwriters. Credit Suisse
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`also participated in conducting and promoting the Offering. Credit Suisse’s participation in the
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`solicitation of the Offering was motivated by its financial interest. Defendant Credit Suisse
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`maintains an office in New York, NY.
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`27.
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`Defendant Mission Capital Management Limited (“Mission Capital”) was an
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`underwriter for the Offering, serving as a financial advisor for and assisting in the preparation and
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`dissemination of the Company’s false and misleading Offering Documents. Mission Capital
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`participated in conducting and promoting the Offering. Mission Capital’s participation in the
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`solicitation of the Offering was motivated by its financial interest.
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`28.
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`Defendant HSBC Securities (USA) Inc. (“HSBC”) was an underwriter for the
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`Offering, serving as a financial advisor for and assisting in the preparation and dissemination of
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`the Company’s false and misleading Offering Documents. HSBC participated in conducting and
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`promoting the Offering. HSBC’s participation in the solicitation of the Offering was motivated
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`by its financial interest. Defendant HSBC maintains an office in New York, NY.
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`29.
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`Defendant Futu Inc. (“Futu”) was an underwriter for the Offering, serving as a
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`financial advisor for and assisting in the preparation and dissemination of the Company’s false and
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`7
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`Case 1:22-cv-07273-VSB Document 1 Filed 08/25/22 Page 8 of 24
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`misleading Offering Documents. Futu participated in conducting and promoting the Offering.
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`Futu’s participation in the solicitation of the Offering was motivated by its financial interest.
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`30.
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`Defendant Tiger Brokers (NZ) Limited (“Tiger Brokers”) was an underwriter for
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`the Offering, serving as a financial advisor for and assisting in the preparation and dissemination
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`of the Company’s false and misleading Offering Documents. Tiger Brokers participated in
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`conducting and promoting the Offering. Tiger Brokers’ participation in the solicitation of the
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`Offering was motivated by its financial interest.
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`31.
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`Defendants listed in ¶¶23-30 are collectively referred to herein as the “Underwriter
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`Defendants.”
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`32.
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`Pursuant to the Securities Act, each Underwriter Defendant is liable for the
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`materially inaccurate, misleading, and incomplete statements in the Offering Documents. In
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`addition, although not an element of Plaintiff’s Securities Act claims and an issue on which each
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`Underwriter Defendant bears the burden of proof to the extent it seeks to assert it as an affirmative
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`defense, no Underwriter Defendant conducted an adequate due diligence investigation in
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`connection with the matters alleged herein and will accordingly be unable to establish a statutory
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`“due diligence” affirmative defense under the Securities Act. Each Underwriter Defendant
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`committed acts and omissions that were a substantial factor leading to the harm complained of
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`herein.
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`33.
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`Each Underwriter Defendant named herein is an investment banking form whose
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`activities include, inter alia, the underwriting of public offerings of securities. As the underwriters
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`of the Offering, the Underwriter Defendants earned lucrative underwriting fees.
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`34.
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`As underwriters, the Underwriter Defendants met with potential investors and
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`presented highly favorable, but materially incorrect and/or materially misleading, information
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`8
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`Case 1:22-cv-07273-VSB Document 1 Filed 08/25/22 Page 9 of 24
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`about the Company, its business, products, plans, and financial prospects, and/or omitted to
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`disclose material information required to be disclosed under the federal securities laws and
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`applicable regulations promulgated thereunder.
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`35.
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`Representatives of the Underwriter Defendants also assisted Dingdong and the
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`Individual Defendants plan the Offering. They further purported to conduct an adequate and
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`reasonable investigation into the business, operations, products, and plans of the Company, an
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`undertaking known as a “due diligence” investigation. During the course of their “due diligence,”
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`the Underwriter Defendants had continual access to confidential corporate information concerning
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`the Company’s business, financial condition, products, plans, and prospects.
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`36.
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`In addition to having access to internal corporate documents, the Underwriter
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`Defendants and/or their agents, including their counsel, had access to Dingdong’s management,
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`directors, and lawyers to determine: (i) the strategy to best accomplish the Offering; (ii) the terms
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`of the Offering, including the price of which Dingdong’s ADS would be sold; (iii) the language to
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`be used in the Offering Documents; (iv) what disclosures about Dingdong would be made in the
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`Offering Documents; and (v) what responses would be made to the SEC in connection with its
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`review of the Offering Documents. As a result of those constant contacts and communications
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`between the Underwriter Defendants’ representatives and Dingdong’s management, directors, and
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`lawyers, at a minimum, the Underwriter Defendants should have known of Dingdong’s
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`undisclosed then-existing problems and plans, and the Offering Documents’ materially inaccurate,
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`misleading, and incomplete statements and omissions, as detailed herein.
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`37.
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`The Underwriter Defendants also demanded and obtained an agreement from
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`Dingdong under which Dingdong agreed to indemnify and hold the Underwriter Defendants
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`harmless from any liability under the Securities Act.
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`38.
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`The Underwriter Defendants caused the Offering Documents to be filed with the
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`SEC and declared effective in connection with the Offering, so that they, and the Individual
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`Defendants, could offer to sell, and sell, Dingdong shares to Plaintiff and the members of the
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`Securities Act Class pursuant (or traceable) to the Offering Documents.
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`D.
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`39.
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`Additional Defendants
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`Defendant Cogency Global was Dingdong’s authorized U.S. representative for
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`purposes of the Offering. Defendant De Vries, who signed the Offering Documents, is an
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`employee of Defendant Cogency Global. As a result, Defendant Cogency Global is liable for the
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`securities law violations committed by Defendant De Vries, in its capacity as employer and as a
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`control person under the Securities Act.
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`40.
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`Dingdong, the Individual Defendants, the Underwriter Defendants, and Cogency
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`Global are collectively referred to herein as the “Defendants.”
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`DEFENDANTS’ FALSE AND MISLEADING
`REGISTRATION STATEMENT AND PROSPECTUS
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`41.
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`On June 8, 2021, Dingdong filed with the SEC an initial registration statement on
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`Form F-1, which would be used for the IPO following a series of amendments in response to SEC
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`comments.
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`42.
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`On June 28, 2021, Dingdong filed its final amendment to the Registration
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`Statement, which registered 6,385,950 Dingdong ADS for public sale. The SEC declared the
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`Registration Statement effective that same day. On June 29, 2021, Defendants priced the IPO at
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`$23.50 per ADS and filed the final prospectus for the IPO, which forms part of the Registration
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`Statement. Through the IPO, Defendants issued and sold approximately 4,072,000 Dingdong
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`ADS, all pursuant to the Registration Statement, for gross proceeds of approximately $95,692,000.
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`43.
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`The Registration Statement contained untrue statements of material fact and
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`omitted to state material facts, both required by governing regulations and necessary to make the
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`statements made not misleading.
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`44.
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`In particular, the Registration Statement misrepresented Dingdong’s supposedly
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`“uncompromising” commitment to product quality, repeatedly emphasizing its ability to “directly
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`provide users and households with fresh produce, meat and seafood and other daily necessities,”
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`and frequently touting its “standardization and digitalization . . . [of the] traditional agricultural
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`supply chain,” which purportedly addresses the significant issues of supply and quality traditional
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`grocers and their customers face. [Emphasis added.] Consistently characterizing Dingdong as an
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`“e-commerce compan[ies] with a reliable supply of quality products and the ability to provide the
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`core components of the ideal shopping experience,” the Registration Statement claims Dingdong
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`has “reshape[d]” the Chinese consumer’s shopping experience for “fresh groceries,” stating in
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`relevant part:
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`In response to both consumer needs and inadequacies in the traditional
`supply chain model in the industry, we launched Dingdong Fresh, our mobile app
`and mini-programs to reshape the Chinese consumer’s online shopping
`experience for groceries. We entered the industry with fresh produce, meats and
`seafood as our initial focal point, a segment known for high-frequency orders and
`relatively difficult procurement and fulfillment operations, and successfully
`expanded into other product offerings. We have embraced a user-centric
`philosophy since our inception, and have in the past four years been committed
`to providing consumers with a wide variety of quality products with fast delivery
`times at attractive prices:
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`
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`
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`Product quality. We procure our products primarily from direct upstream
`sources such as farms and cooperatives and apply stringent quality control
`across our entire supply chain to ensure product quality to our users.
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`Speedy delivery. Powered by our frontline fulfillment grid and robust,
`digitalized fulfillment capabilities, we deliver almost one million orders per
`day, and target to get orders within 30 minutes to our users.
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`Case 1:22-cv-07273-VSB Document 1 Filed 08/25/22 Page 12 of 24
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`
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`Product variety. We offer a diversified portfolio of fresh groceries and
`other daily necessities tailored for local needs to address a greater share of
`each family’s consumption needs.
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`[Emphasis added.]
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`45.
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`According to the Registration Statement, these capabilities have resulted in
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`Dingdong “achiev[ing] significant scale . . . with a strong and active user base and increasing
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`engagement and stickiness.”
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`46.
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`The Registration Statement adds to this narrative by describing the Company’s
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`efforts to assure “end-to-end quality control,” through the digitalization of its core operations:
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`[W]e have digitalized all of our core operations, building a [sic] full suite supply
`chain solutions to assure end-to-end quality control, which allows us to
`continuously optimize operating efficiency while providing users with the best
`products for value. We have streamlined the farm-to-home supply chain by
`cutting out intermediaries and guaranteeing strict end-to-end quality control
`through our 7+1 Quality Control Procedure, across the entire procurement and
`fulfillment process.
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`[Emphasis added.]
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`47.
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`According to the Registration Statement, Dingdong’s 7+1 Quality Control
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`Procedures are quite comprehensive and stringent:
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`We have designed stringent quality control standards and enforced
`comprehensive quality control measures covering every aspect of procurement
`and sourcing, which crystallize into our 7+1 Quality Control Procedure, namely
`(i) new product review and approval, (ii) original quality inspection during
`procurement, (iii) inspection upon arrival at regional processing centers,
`(iv) sorting, processing and labeling, (v) storage and inspection, (vi) order
`packaging, (vii) delivery, and (viii) feedback and customer services. . . .
`
`New Products Review and Approval. Before intaking any new product
`varieties, we conduct a series of quality assurance reviews. For example, our
`procurement team will form a sample tasting committee to vet the proposed new
`products, and our quality control department will decide the compliance status of
`the product and the manufacturer or distributor. Subsequently, our information
`maintenance team will verify and create the new product’s commercial information,
`and the promotional campaigns’ data monitoring and optimization will also be
`evaluated on a continuous basis.
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`Original Quality Inspection. We carefully grade fresh products from our
`suppliers at their origins and select fresh products that meet our grading system.
`Direct cooperation with these local suppliers enables us to increase supply chain
`efficiency by minimizing supply chain costs and ensure product quality.
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`Inspection upon Arrival. The products are subject to our inspection upon
`arrival at our regional processing centers, and we may refuse acceptance of any
`defective products. In case of any quality defects that are not due to our negligence
`in storage, we are entitled to a prompt replacement or refund by the suppliers
`pursuant to the supply agreement. Our frontline fulfillment stations will also
`inspect product deliveries before accepting them, and only those meeting our
`internal quality standards can be eventually delivered to our customers.
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`Sorting, Processing and Labeling. Our warehouse management system and
`automated equipment aid our regional processing centers’ sorting, processing and
`labelling efforts, which minimizes human error and contamination. For products
`with a shelf life of less than 60 days, special batch codes will be affixed for easy
`management. We also ensure that the shelf life of fresh groceries are adjusted
`dependent upon seasons to avoid spoilage.
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`Storage and Inspection. In each of our regional processing centers and
`frontline fulfillment stations, we set up storage areas with different temperature
`layers for different products. As we set a specific shelf life for and are able to
`monitor the shelf life of each product, we are able to ensure that only products
`within two thirds of the shelf life are sold to our customers.
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`Packaging. To ensure the freshness of our products, our system
`automatically generates instructions for order packaging, which takes into account
`the customer’s requested delivery time and calculates the time when the order
`should start to be packaged.
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`Delivery. After order packaging is completed, our system assigns the order
`to the most conveniently situated rider, automatically generating the optimal
`pathing for delivery. We allow users to track the shipping status of their orders
`through our mobile app and rate riders. We are committed to transporting and
`delivering all of our fresh groceries by self-operated cold chain logistics.
`
`Feedback and Customer Services. Our mobile app provides instant
`responses to customer feedback, and we maintain a customer service hotline so that
`we can timely address complaints and make corresponding improvements to our
`services and products. See “The Dingdong Fresh Experience ‒ Customer Service.”
`
`[Emphasis added.]
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`Case 1:22-cv-07273-VSB Document 1 Filed 08/25/22 Page 14 of 24
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`48.
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`In addition, the Registration Statement credits the Company’s supposed
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`“pioneer[ing]” self-operated frontline fulfillment grid model for helping to deliver the freshest
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`products:
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`We were one of the pioneers in using a frontline fulfillment grid model to
`address last-mile delivery for fresh groceries while still scaling rapidly. On
`average, each station under our frontline fulfillment grid can directly reach over
`tens of thousands of households in the neighborhood with the ability to realize our
`30 minute delivery target, greatly assuring the freshness [of] the products when
`they reach users. In addition, compared with the offline retail store model, the
`frontline fulfillment grid model is less dependent on site selection and front-end
`operators, has faster inventory turnover and has greater scalability in terms of
`rapidly addressing new regional markets and user demographics. Our frontline
`fulfillment grid is supported by 40 regional processing centers that sort, package,
`label and store raw products prior to fulfillment.
`
`Compared with the franchise model, our self-operated frontline fulfillment
`grid model provides more alignment of interests across our organization to assure
`our product quality, speedy delivery and product variety to consumers and
`digitalization throughout our operations.
`
`[Emphasis added.]
`
`49.
`
`Likewise, Dingdong’s “[s]trong sourcing and procurement capabilities” supposedly
`
`afford it the ability to “better ensure . . . product quality”:
`
`To better ensure our product quality, we have deeply focused on
`cultivating our upstream sourcing capabilities and modernizing the highly
`fragmented agricultural supply chain. We work closely with our upstream
`suppliers, such as farms and cooperatives, to seamlessly integrate their operations
`with ours. We offer them not only large order flow, but also accurate demand
`projections so that they can perform demand-based production. We also empower
`them through sharing data-driven insights and research, such as proliferating the
`implementation of our proprietary, scientific D-GAP agricultural planting standard
`without additional costs to suppliers to improve the quality of the products we
`source at their place of production. Our close collaboration and high engagement
`with our suppliers assure us a reliable and diverse supply of high-quality
`products, and continuously strengthen our bargaining power and procurement cost
`advantages.
`
`Leveraging our in-depth industry experience and large-scale procurement
`advantages, we have begun to build our own brands to increase consumer
`recognition and stickiness. We select product types and categories with high
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`14
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`Case 1:22-cv-07273-VSB Document 1 Filed 08/25/22 Page 15 of 24
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`purchase frequency, inelastic demand, high scalability, outdated supply and
`fulfillment chains and high potential for growth.
`
`Our close ties with upstream suppliers allow us to maintain a stable supply
`of quality products while reducing our procurement costs.
`
`[Emphasis added.]
`
`50.
`
`The Registration Statement adds in relevant part:
`
`We select suppliers on the basis of their reliability, logistics capabilities,
`productivity, food safety assurance and pricing. They must be able to meet our
`demands for timely supply of fresh and safe products. We perform background
`checks on our suppliers and the products they provide before we enter into any
`agreement. We examine their business licenses and the qualification certificates
`for their products, check their brand recognition and conduct background
`investigations into their cooperation history and partners. We also conduct on-site
`visits to assess and verify their farming locations, business scale, management
`experience, production capacity, logistics capabilities, and quality control system.
`As food safety is our top priority, all of our suppliers are required to be outfitted
`with applicable facilities, equipment and personnel to inspect pesticide residue
`and to be able regularly conduct testing and generate quality reports for their
`products. In addition, we also require our suppliers to have complete and flexible
`logistics capabilities, including cold chain logistics, to ensure a sustainable and
`timely supply of our fresh groceries. Once a supplier is selected, we conduct a one-
`month trial run to test its overall capabilities.
`
`[Emphasis added.]
`
`51.
`
`In truth, however, at the time of the IPO, Dingdong was actively flouting its food
`
`safety responsibilities, failing to deliver on its stated commitment to provide “fresh” groceries to
`
`customers historically disserved by supermarkets, traditional Chinese wet markets, or traditional
`
`e-commerce platforms. Dingdong’s quality control measures, which were so heavily touted in the
`
`Registration Statement, were, in fact, inadequate, exposing Dingdong to an increased risk of
`
`regulatory and/or governmental scrutiny and enforcement. Because the Registration Statement
`
`misled prospective investors about Dingdong’s commitment to the safety and quality of the food
`
`it distributes to the market and failed to disclose the truth about Dingdong’s lack of sufficient and
`
`15
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`

`Case 1:22-cv-07273-VSB Document 1 Filed 08/25/22 Page 16 of 24
`
`effective quality control policies and procedures, Plaintiff and other ADS purchasers had no
`
`opportunity to adequately assess the value of the shares offered in connection with the IPO.
`
`52.
`
`Defendants were required to disclose this material information in the Registration
`
`Statement. Item 303 of SEC Regulations S-K, 17 C.F.R. §229.303 imposed an independent duty
`
`on Defendants to disclose in the Offering Documents any known trends or uncertaintie