A proposed class action lawsuit alleges Alibaba Group Holding Limited investors were harmed financially when the more than $34 billion initial public offering (IPO) for the Chinese e-commerce giant’s fintech affiliate Ant Group was suspended because the payment processor reportedly fell short of certain regulatory disclosure and listing qualification requirements.
The 22-page lawsuit alleges Alibaba failed to disclose to investors certain “material adverse facts” about its business, namely that Ant Group did not meet Chinese stock market listing qualifications or disclosure requirements for certain material matters, that impending changes within the fintech regulatory landscape would impact Ant Group’s business and that, as a result, Ant Group’s IPO, pegged as the largest in history, would likely be halted.
Alibaba share prices fell more than eight percent per share on November 3, when Ant Group’s IPO was suspended, on “usually heavy trading volume,” according to the complaint. The case looks to represent those who bought or otherwise acquired Alibaba securities between October 21 and November 3, 2020.
“As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages,” the suit says.
Alibaba owns a 33 percent equity interest in Ant Group, a financial technology company known for operating Alipay, one of the largest mobile and online payment platforms. On July 20, 2020, Ant Group announced it had gotten the ball rolling on a concurrent IPO for Ant Group on the Shanghai and Hong Kong stock exchanges, with Ant Group, having priced its IPO on October 26, set to raise $34.5 billion, making it the largest initial public offering in history, according to the complaint.
The lawsuit alleges, however, that statements made by Alibaba, CEO Daniel Zhang and CFO Maggie Wu in October documents submitted to the Securities and Exchange Commission were “materially false and/or misleading” given no disclosure was made with regard to Ant Group’s apparent listing qualifications and disclosure requirement shortcomings or imminent changes to the fintech regulatory environment, and that as a result of the foregoing, its IPO would be frozen.
On November 2, the Financial Times divulged that Chinese regulators had met with Ant Group controller Jack Ma, executive Chairman Eric Jing and CEO Simon Hu, the lawsuit says. Per the case, the Financial Times report did not disclose details of the meeting but described the interview with the Chinese word yuetan, which “generally indicates a dressing down by authorities.” The following day, Ant Group’s IPO was suspended, and Alibaba’s share price dropped more than $25 per share, the suit says.
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