Alibaba accused of ‘securities fraud’ in US as regulatory headwinds blow

By GT staff reporters Source: Global Times Published: 2020/11/15 21:38:40

An employee works at the Shanghai distribution center of ZTO Express in Shanghai, east China, Nov. 12, 2017. Courier companies were running at full speed to deliver massive number of parcels after Alibaba Group's 11.11 Singles' Day global online shopping spree on Nov. 11. (Xinhua/Ding Ting)

Clouds continue to gather over Alibaba, as a law firm in Beijing representing investors in the e-commerce titan's US listing has filed a class action lawsuit faulting inadequate disclosure of regulatory tightening that shelved the IPO of Alibaba's fintech offshoot.

However, there is a very small chance of Alibaba being delisted, the law firm's chief told the Global Times on Sunday. 

It would be difficult to substantiate the plaintiffs' claim, said an industry observer, noting that the lawsuit is part of stronger headwinds confronting the e-commerce giant, whose businesses are coming under financial regulators' scrutiny.

Investors in US-traded shares of Alibaba are accusing the firm of securities fraud, citing its failure - from October 21 to November 3 - in disclosing major disadvantageous facts including Ant Group not meeting listing qualifications, the imminent major change in the fintech regulatory environment - which is set to send a shockwave across Ant Group's businesses - the resultant possibility of the IPO being put on hold, and consequently misguided narratives of Alibaba's businesses, operations and growth prospects. 

Right ahead of Ant Group's planned dual listing, a late-night announcement on November 2 sur-prised the markets with news that China's top financial regulatory authorities had summoned Ant Group's actual controller Jack Ma Yun and the fintech giant's management for talks.

As of Friday, Alibaba's US shares were down 14.4 percent this month. Its shares in the Hong Kong market were down 12.35 percent for November. 

If there's a stock plunge in the US following significant unfavorable information, a class action case will be filed as soon as possible, said Hao Junbo, chief lawyer at the HAO Law Firm in Bei-jing, who said that many Alibaba investors have contacted his firm.

Hao's law firm has yet to decide on a lead plaintiff with the biggest losses to act on behalf of other class members. The deadline for Alibaba investors to submit claims in the class action suit is January 12, 2021.

The law firm previously represented global investors in a class action suit against Luckin Coffee. The Chinese coffee chain, mired in an accounting scandal, announced in June it would delist from NASDAQ.

The Alibaba case is a much smaller suit than the Luckin Coffee one, Hao said, noting the odds of Alibaba getting delisted are quite slim. 

Securities class actions are quite normal in the US and to prove that Alibaba would have known of the regulatory tightening or that Ant Group's IPO might be halted would be quite difficult, a Shanghai-based market observer told the Global Times on condition of anonymity.

The observer said however it's still a signal of a trend reversal and could be another issue in Alibaba's ability to fend off the headwinds that are buffeting its businesses.  

"It's like sailing the sea. Everything's good when you're on a roll and quite the opposite when sailing against the wind," he commented, citing the IPO suspension that has already gotten Ant into trouble as its early investors might have made a bet that the fintech firm would offer IPO gains.

In a recent interview with the Global Times, Web Summit founder Paddy Cosgrave said regula-tion is particularly important in new financial services or fintech, so there won't be a big concern over its future growth.

There will be antitrust regulations across various sectors of technology covering platform technologies, Cosgrave reckoned.

Calling Alibaba founder Ma an eloquent genius, he said Ant Group will probably still be the big-gest fintech firm in the world when it eventually goes public. 

Newspaper headline: Investors’ lawsuit claims US securities fraud by Alibaba


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