Seven US law firms have filed a class action lawsuit against Chinese e-commerce giant Alibaba, alleging that the company concealed its investigation by the authorities. The investigation would drive down the market value of the company by over US$30 billion over four trading sessions ending on Feb. 2, reports the Chinese-language National Business Daily.
The seven law firms are notorious raiders on China concept stocks on the US stock market. Between 2010-12, they attacked 30 stocks, forcing the companies to delist their shares or file for bankruptcy as a result. Some chose to reach settlement, enabling the law firms to collect 30% of the compensation as fees.
At issue is the findings of a survey by the State Administration for Industry and Commerce (SAIC) showing the high percentage of knockoff products sold on Taobao, China’s largest e-commerce website and under the auspices of Alibaba Group. The authorities deliberately withheld the findings of the survey until completion of Alibaba’s US IPO, according to the Associated Press.
A SAIC spokesman tried to play down the status of the post on its website showing the findings of the survey, saying it was just the minutes of a meeting and held no legal power.
Hao Junpo, a lawyer, however, said that the SAIC did not refute the authenticity of the post, a move which may play into the hands of the US law firms insisting that Chinese officials or Alibaba management might have deliberately concealed some facts to the detriment of the interests of US investors.
Hao said that, should the US court uphold the class action and then turn down application by the defendant, the law suit would enter the stage of mediation, which promises to be a protracted process.
The legal action, however, will be aborted, should no investors in Alibaba stocks entrust the law firms to file suit against Alibaba.
Alibaba listed in the US last year in a record IPO, along with 14 other Chinese firms, including Jingdong Mall, another major e-commerce operator in China — a record number for IPOs of Chinese firms in the US since 2011. Together, the 15 firms raised US$25.4 billion in funds from the US market.