Class Action Lawsuit Filed Against Alibaba for IPO-Related Violations of the U.S. Securities Exchange Act

Five U.S. law firms, one of which is Pomerantz, are presently reaching out to investors to join a class action lawsuit against Alibaba for a breach of the U.S. Securities Exchange Act.  This lawsuit was filed in the New York District Court and the complaint alleges that Alibaba ‘‘‘issued materially false and misleading statements regarding the soundness of the company‘s business operations, the strength of its financial prospects and concealing substantial ongoing regulatory scrutiny.‘  At this writing, it will apply to purchasers of Alibaba shares from October 21, 2014 through January 28, 2015.  (The company‘s $25 billion IPO was issued in September, two months after the damaging investigatory findings of China‘s State Administration for Industry and Commerce ‘‘‘ SAIC.)

Alibaba‘s share value fell by 14% last week, creating shareholder losses of some $30 billion.  Following an SAIC audit last year, it was revealed, among other legal infractions, that nearly 66% of the merchandise traded on Alibaba‘s popular Taobao e‑commerce platform was counterfeit or ‘‘‘fake.‘

On Friday, January 30, Jack Ma, Alibaba‘s Founder and Executive Chairman, met with Zhang Mao, Minister of SAIC, to adopt a common, conciliatory line in an attempt to avert shareholder blow-back following an emotionally-ladened dispute that reeled out of control.  That same day, SAIC claimed that the damning document it released on Alibaba‘s business practices last week was not a ‘‘‘White Paper‘ ‘‘‘ as described at the time, which nearly always conveys official policy positions ‘‘‘ but rather ‘‘‘Minutes‘ of the July meeting with Alibaba, a document with supposedly no legal standing.  This kind of linguistic alchemy is unlikely to knock the aforementioned U.S. law firms off the scent of this apparent IPO material risk omission.