Xinhua Finance Media (XFML) has signed an agreement to acquire total interest in Beijing Mobile Interactive Company.

This acquisition is intended to enable XFMedia to rapidly integrate mobile service capabilities with its existing range of popular media assets and market a variety of new interactive products and services to more than 487 million mobile phone users in China.

Founded in November 2003, Beijing Mobile Interactive Company is a mobile service provider in China with SP licenses nationwide operating on wireless Mobile Value-Added Service platforms. The company is the exclusive partner of China Mobile's Monternet education channel, with more than two million users per month.

The transaction is expected to close on or prior to June 15, 2007. Under the agreement, XFMedia will acquire 100% control of Beijing Mobile Interactive Company through the purchase of 100% of the shares of East Alliance Limited, a company which conducts Beijing Mobile Interactive Company's business through its wholly owned subsidiary and affiliated entities in China. XFMedia will pay approximately US$10 million in cash to the seller at the closing, and the vendors will be entitled to earnout payments in cash and shares of XFMedia depending on their 2007 and 2008 financial performance.

In the United States, Lerach Coughlin Stoia Geller Rudman & Robbins LLP has announced that a class action has been commenced in the United States District Court for the Southern District of New York on behalf of all persons or entities who acquired Xinhua Finance Media American Depositary Shares pursuant to "the company's false and misleading Registration Statement and Prospectus" issued for its March 8, 2007 initial public offering.

The complaint charges Xinhua and certain of its officers and directors with violations of the Securities Act of 1933. It alleges that on March 9, 2007, Xinhua accomplished its IPO of 23.07 million ADSs, representing 46.15 million common shares, at US$13.00 per ADS, including 1.5 million shares sold by Xinhua's Chairman and Chief Executive Officer, Fredy Bush, for net proceeds of US$300 million, pursuant to the Registration Statement. Due to defendants' positive but false statements following the IPO, by May 15, 2007, the stock was trading around US$12.00 per share.

The legal firm then says on May 21, 2007, Barron's published an article on Xinhua disclosing that the Registration Statement for the IPO failed to disclose that Xinhua's Chief Financial Officer was simultaneously the company's CFO and an investment banker and stockbroker who ran a securities firm that had been under regulatory scrutiny in the past year. On this news, Xinhua's stock price collapsed from $10.79 per share on May 17, 2007 to close at $8.76 per share on May 21, 2007, on unusually high volume.

The plaintiff seeks to recover damages on behalf of all persons or entities who acquired Xinhua ADSs pursuant to the company's allegedly false and misleading Registration Statement issued in connection with its IPO.


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