Heng Ren Gets Renren's Shareholders Their Day in Court - in the U.S.

Published on May 21, 2020 7:05 AM

(SI Newswire) NEW YORK (May 21, 2020) --- The New York State Supreme Court on Wednesday denied a Chinese company’s attempt to block a lawsuit in the U.S. brought against it by shareholder activist Heng Ren and other investors for allegedly shortchanging shareholders more than $500 million in a related-party transaction.

The lawsuit, In re Renren, Inc. Derivative Litigation (NYSE: RENN), alleges the company’s Chairman, Mr. Joseph Chen, along with former Director David Chao and SoftBank, maneuvered to transfer valuable assets, including a large stake in fintech unicorn Social Finance, Inc. (SoFi), to their Cayman company in a transaction priced at a discount of hundreds of millions of dollars below its estimated value.

"This is an important message that American investors now are sending to Chinese companies on our stock markets: Don’t tread on me," said Peter Halesworth, founder and manager of Heng Ren. "For too long U.S. shareholders have been getting a raw deal from bad actors from China in our stock markets, without American investors having much recourse to our own courts."

The ruling, by Justice Andrew Borrok, allows the shareholders’ litigation for breach of fiduciary duty, among other claims, by Chairman Chen and co-defendants to be heard in the Supreme Court of New York instead of in a foreign court. The primary allegation is Renren in 2011 raised more than $750 million in a U.S. initial public offering (IPO) on the New York Stock Exchange (NYSE). Renren then invested these funds primarily in U.S. private companies, including a large stake in SoFi.

As these investments grew in value, Chairman Chen allegedly sought to engineer corporate transactions to wrest control of these valuable investments from Renren and its U.S. shareholders. In 2018, Renren transferred the assets to a Cayman company controlled by Chen and Chao, at an undervaluation which allegedly shortchanged shareholders by more than $500 million in compensation.

The plaintiffs in the case include the Heng Ren funds and a fund managed by Oasis Management Company. Renren’s failed motion to dismiss the lawsuit from New York still can be appealed by the defendants. The attorneys for the plaintiffs were Reid Collins & Tsai LLP, Ganfer, Shore, Leeds & Zauderer LLP, Grant &Eisenhofer P.A., and Gardy & Notis LLP.