Jumei, China’s largest online discount beauty products retailer, is being investigated by Cohen, Placitella & Roth, P.C. on behalf of investors who purchased Jumei International Holding Limited during the period from May 16, 2014 through November 19, 2014.

The investigation concerns whether Jumei and certain of its officers, directors and underwriters of its May 10, 2014 initial public offering (“IPO”) violated federal securities laws. At the time of its IPO, the Company both sold products directly to consumers and sold products from third-party merchants, charging “marketplace services” fees on those sales. In the year prior to the IPO, the Company achieved 30% of its gross merchandise value from marketplace services.

On May 16, 2014, Jumei commenced its IPO at $22 per share.  Falsely touting an expansion of the Company’s marketplace services, the IPO offering documents omitted that the Company already intended to cease offering those services in favor of direct merchandise sales. 

On November 19, 2014, Jumei disclosed disappointing quarterly earnings on slower than anticipated growth.  The Company’s gross profit margin had eroded and it was experiencing its slowest growth on record. 

Shortly thereafter, a Barron’s article, titled “Why Jumei’s Business Model is Broken.  Selling Authentic Makeup is costly,” disclosed that the Company’s shift away from third-party merchant sales had severely limited Jumei’s offerings of top brands.  On this news, Jumei’s stock fell precipitously by 13% to $19.32, 12% below the IPO price and well off a post IPO high of $39.45.