Investigation Complete, Gridsum CEO Pledges to Regain Momentum in the New Year
The head of the Chinese technology solutions provider said the company had emerged from its "most difficult period" and would seek to recover in 2019.
Gridsum Holding Inc. (Nasdaq: GSUM) published a letter to shareholders Tuesday in which the head of the company said the investigation into its accounting audits has been completed, and he pledged to improve the company's performance and scale its business in 2019.
Guosheng Qi, the chief executive and co-founder of the company, which provides big data analytics and solutions in artificial intelligence, sent a message to shareholders after Gridsum's stock hit a 52-week low of $1.60 per American depositary share on Monday. Shares in the company fell even further after-hours when it posted its financial results for the first six months of last year, which reflected a net loss of $27.5 million, as well as a negative outlook for the full year 2018.
Qi said in his statement today that the company has completed the investigation into its audits in October and has changed its accounting method for financial reporting, regained compliance with the SEC filing requirements, and taken measures to improve internal controls.
The statement came after Gridsum received a letter earlier this month from the Listing Qualifications Department of The Nasdaq Stock Market, notifying that it may face delisting because it did not file a report containing an interim balance sheet and income statement for the six-month period ended June 2018.
"In the process, we also identified other adjustments relating to cost accruals, expense cutoff procedures and classification changes, which resulted in restatements of our previously issued audited consolidated financial statements for the years ended December 31, 2015 and 2016," Qi added.
The investigation launched in April after the company's annual audit for 2016 was suspended as "unreliable" by its then-accounting firm. That snowballed into investigations by several securities litigation and investor rights firms for possible violation of federal securities laws by certain officers and directors of the company.
With the end of its investigation, Gridsum has begun "to emerge from the most difficult period in our company's life," Qi wrote. "Unfortunately, the company has suffered some client and staff defections and a marked slowdown in our momentum," which has "negatively impacted" its financial performance in 2018 and 2019, he added.
This year, Gridsum will focus on rebuilding momentum in its core businesses amid a "tough macroeconomic environment," Qi said.
"Longer-term, we believe we are well positioned to leverage our strong technical competitive advantages in areas such as Intelligent CRM, legal solutions, IIoT and associated big data and AI-grade data warehousing."
By noon Tuesday, Gridsum's shares were down 6 cents, at $1.54.