Alibaba faces renewed lawsuit over stock market launch
Logo of Alibaba[File Photo: VCG]
A US appeals court has revived a lawsuit that accuses Alibaba Group Holding Ltd of cheating shareholders by withholding information shortly before going public in 2014.
The 2nd US Circuit Court of Appeals in Manhattan ruled 3-0 that a lower court judge erred in dismissing claims by holders of Alibaba’s American Depositary Shares and ADS call options against Alibaba, executive chairman Jack Ma and others.
It is alleged that the Chinese online retailer had concealed a regulatory warning about counterfeiters.
In June 2016, chief judge Colleen McMahon of the US District Court in Manhattan dismissed the nationwide lawsuit, saying Alibaba had flagged the regulatory risks in its IPO materials.
Shareholders accused the company of concealing a meeting on July 16, 2014, two months before its 25-billion-US-dollar initial public offering, in which China’s State Administration for Industry and Commerce (SAIC) threatened huge fines if Alibaba failed to suppress counterfeiting.
The appeals court called the SAIC threat “highly material” to investors because it “required Alibaba to choose between giving up an important source of its revenue or risking enormous fines,” either of which could hurt results or the IPO’s success.
Alibaba expressed disappointment with the ruling by the judges but said they did not determine that Alibaba had violated US securities law.
“We believe our behavior was entirely appropriate, and we intend to defend ourselves vigorously as this litigation progresses,” the company said in a statement.
Alibaba has long faced accusations that its websites are a haven for counterfeiters, including of luxury goods.
The price of Alibaba’s ADS fell 12.8 percent on Jan. 28 and 29, 2015 after the SAIC revealed its concerns about products that were banned, fake or substandard, or infringed trademarks.