Alibaba Said By Law Firm To Be Facing IPO Statements Lawsuit
Published on Jan 31 2015 11:02 AM in Technology
Alibaba Group Holding Ltd. was sued over claims it made misleading statements and concealed regulatory scrutiny, following earnings that missed estimates and caused shares to drop 8.8 per cent, the most since its September listing.
The law firm Robbins Geller Rudman & Dowd LLP said Friday that it filed the lawsuit in federal court in New York against the company and some officers based on alleged violations of securities laws. The complaint couldn’t be independently verified in court records.
Alibaba, according to the law firm, is accused of failing to disclose that executives met with China’s State Administration of Industry and Commerce in July 2014, just two months before its initial public offering, and that regulators raised concerns about possibly illegal business practices.
On Jan. 28, media organizations reported that Chinese regulators released findings that the company engaged in the illegal conduct raised in July, according to a copy of the complaint provided by the law firm.
The following day before market trading, Alibaba issued its quarterly results, causing the declines that erased more than $11 billion in market value, according to the complaint. The fortune of Alibaba founder Jack Ma, who is a defendant in the lawsuit, fell $1.4 billion.
“Alibaba believes that the claims asserted in the recently filed litigation are without merit and intends to defend itself vigorously,” a spokesman for the company said in an e-mailed statement.
The law firm said the illegal activities on the site include the “rampant sale of counterfeit goods,” such as fake cigarettes, alcohol and branded handbags, and restricted weapons, by vendors on Alibaba’s platform. Alibaba employees accepted bribes from merchants seeking to improve their search rankings and get advertising space, according to the suit.
Alibaba revenue was 26.2 billion yuan ($4.2 billion) in the third quarter, compared with the 27.6 billion-yuan average of 25 analyst estimates. Ads on mobile phones generate less money than those on desktop computers because of their smaller screens, and transactions on the Tmall platform grew at a slower pace, the Hangzhou-based company said.
Samuel Rudman, a lawyer representing shareholders, didn’t immediately return a call and an e-mail after regular business hours Friday seeking comment on the lawsuit.
News by Bloomberg, edited by ESM