Alibaba faces renewed Lawsuit on IPO

According to Reuters, A U.S. appeals court resuscitated a lawsuit that accused Alibaba Group Holding Ltd. (NYSE: BABA) of concealing a regulatory warning of counterfeiters that the company received prior to going public.  The defrauding shareholders allegation was ruled 3-0 in Manhattan by the 2nd U.S. Circuit Court of Appeals that a court judge dismissed claims against Alibaba’s Executive Chairman Jack Ma and others.

Although the company has faced accusations on its website having counterfeiters that even sell luxury goods.  Shareholders had accused the Chinese online retailer of covering up a meeting on July 16th, 2014, two months before its initial public offering.  China’s State Administration for Industry and Commerce had threatened large fines if the company failed to deal with counterfeiters.

In June of 2016, Judge Colleen McMahon of the U.S. District Court had dismissed the lawsuit, claiming that Alibaba mentioned the regulatory risks in its IPO documents.  The plaintiffs on Tuesday insinuated that Alibaba intended to defraud them.

“Given the eventual market reaction to revelation of the information that was concealed at the time of the IPO, its revelation would likely have had a multi-billion-dollar negative effect,” the appeals court said.  The lawsuit is back in McMahon’s hands moving forward.

Although Alibaba is faced with the same lawsuit from two and a half years ago, impact on current share value of the company seems minimal on this announcement.

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