Washington (Monitoring Desk): Online Chinese retailer Alibaba will face renewed lawsuit over IPO in USA.
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.
Alibaba had no immediate comment. The company has long faced accusations that its websites are a haven for counterfeiters, including of luxury goods.
Shareholders accused Alibaba of concealing a meeting on July 16, 2014, two months before its $25 billion initial public offering, in which China’s powerful State Administration for Industry and Commerce threatened huge fines if Alibaba failed to suppress counterfeiting.
The price of Alibaba’s ADS fell 12.8 per cent on January 28 and 29, 2015 after the SAIC revealed its concerns about products that were banned, fake or substandard, or infringed trademarks.
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.
But in Tuesday’s decision, which did not rule on the merits, the appeals court said the plaintiffs adequately alleged that Alibaba intended to defraud them.
It called the SAIC threat “highly material” to investors because it “required Alibaba to choose between giving up an important source of its revenue and risking enormous fines,” either of which could hurt results or the IPO’s success.