BEIJING (Caixin Online) — A U.S. law firm has filed a class action complaint in New York district court against e-commerce giant Alibaba Group BABA, -3.39% for allegedly violating the U.S. Securities Exchange Act.
Robbins Geller Rudman & Dowd LLP said in a Jan. 30 statement that Alibaba used false information to mislead the public before its listing on the Nasdaq stock exchange regarding the soundness of its business operations, the strength of its financial prospects and concealing substantial regulatory scrutiny.
The law firm said the complaint alleges that Alibaba failed to disclose that its executives met with China’s State Administration of Industry and Commerce (SAIC) in July, two months before its $25 billion initial public offering in New York, and that regulators raised questions about “a variety of highly dubious — even illegal — business practices.”
The law firm said it filed the lawsuit in U.S. District Court in New York on behalf of an Alibaba stockholder named Manishkumar Khunt.
Robbins Geller Rudman & Dowd is appealing to other investors to join the lawsuit. It did not say what compensation it is seeking.
The law firm said Alibaba’s share price fell amid unusually high trading volume on Jan. 28, the day after the SAIC published a white paper summarizing its July meeting with Alibaba executives.
Alibaba’s share price fell to $89.81 on Jan. 29, down 8.8% from the closing price a day earlier, when it slipped 4.4%. The closing price on Monday was $90.13.
The SAIC, China’s commerce regulator, has been locked in a high-profile war of words with Alibaba over counterfeit goods sold on the company’s e-commerce websites.
The dispute started on Jan. 27, when Alibaba publicly challenged SAIC officials over a survey that found that more than 60% of sampled goods on the Taobao website are “not genuine.”
SAIC then released the white paper, which detailed a closed-door meeting between SAIC officials and Alibaba executives over counterfeiting and other irregularities at the company.
In an apparent attempt to defuse the crisis, the SAIC said on Jan. 30 the document is only the minutes of a closed-door meeting and carries no legal weight.
Chen Litong, a member of the All China Lawyers’ Association who practices law in China and in the U.S. state of New York, said that to win class-action litigation, plaintiffs must provide evidence in five criteria, such as whether defendants made false and misleading statements and if losses occurred as a result.
“The SAIC document and its subsequent elaboration seem to only serve as direct evidence that met the first criteria,” he said.
The SAIC document is likely to be accepted as evidence in a U.S. court because evidence that existed before a suit is filed carries more weight that what’s collected in the course of litigation, Chen said.
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