Dada Nexus says review found some transactions made primarily to meet targets

In a regulatory filing last night, Dada Nexus noted that as previously disclosed by the company in its Form 6-K filed on January 8, 2024, an Audit Committee, with the assistance of independent professional advisers, initiated an independent review of certain suspicious practices that were identified during a routine internal audit by the company and that might cast doubt on certain revenues from the company’s online advertising and marketing services in 2023. The Independent Review is now substantially complete. “The Independent Review identified certain online advertising and marketing services transactions during the Review Period that were conducted primarily to meet revenue targets. These transactions involved payments from certain upstream customers and disbursements of cash funds to certain downstream vendors of virtually identical amounts that lacked any apparent business substance, were not supported by credible documents, business records or other evidence, and, in certain cases, involved customers and vendors with undisclosed connections. While managerial oversight could be enhanced, and certain management-level executives should have followed up on the indicia of suspicion that had come to their attention, the Independent Review did not uncover any direct evidence that Company management-level executives, including its President and former Chief Financial Officer, orchestrated the aforementioned transactions. As a result of these transactions, certain revenues and associated costs were overstated in the Company’s past financial statements. Specifically, the Company’s net revenues were overstated by approximately RMB69 million in the fourth quarter of 2022, RMB40 million in the first quarter of 2023, RMB214 million in the second quarter of 2023, and RMB245 million in the third quarter of 2023, respectively. The Company’s operations and support costs were overstated by approximately RMB70 million in the fourth quarter of 2022, RMB42 million in the first quarter of 2023, RMB214 million in the second quarter of 2023, and RMB250 million in the third quarter of 2023, respectively,” the company stated. Dada Nexus Limited also announces that, Mr. Jeff Huijian He, who formerly served as the company’s President and Director, is stepping down following the substantial completion of the Independent Review that was separately disclosed. Mr. Bing Fu, who currently leads the Company’s Dada Now business, will serve as the company’s Interim President and oversee the company’s business operations under the guidance of the board of directors, effective immediately. Meanwhile, the board of directors is actively evaluating the company’s leadership composition in light of the company’s long term development plans.