Alibaba Group (BABA, Financial) has reached a settlement agreement in a U.S. class action lawsuit filed by investors, agreeing to pay $433.5 million. Despite the settlement, Alibaba denies any allegations of wrongdoing or liability and states that the decision to settle was made to avoid further litigation costs and disruption. The settlement is pending several conditions, including court approval, and does not constitute an admission of any legal claims.
This settlement represents one of the largest securities class action settlements under the Private Securities Litigation Reform Act (PSLRA) in nearly 30 years and ranks among the top 50 in the U.S. The lawsuit accused Alibaba of misleading statements regarding its alleged monopolistic practices and Ant Group's IPO, claiming these led to artificially inflated stock prices.
The court dismissed allegations related to Ant Group's IPO but focused on antitrust behavior and misrepresentation. These claims involve complex economic and regulatory issues under Chinese antitrust laws. Investigations into Alibaba's practices began in December 2020, with penalties imposed in April 2021. After several years, Alibaba completed its compliance rectifications by August 2024.
Senior Partner You Yunting from Shanghai DeBund Law Firm noted that both parties faced risks. Alibaba risked substantial compensation if litigation continued, while plaintiffs faced lengthy claims processes and challenges in gathering evidence in China. Even if liability was established, proving causation of significant losses remained a challenge.
The $433.5 million settlement constitutes 3.73% of the potential maximum compensation of $11.229 billion, more than doubling the average settlement percentage in securities class actions from 2021 to 2023.
Eligible Chinese investors in Alibaba's U.S. stocks may also benefit from this settlement. The "settlement class" includes those who purchased or acquired Alibaba American Depositary Shares between November 13, 2019, and December 23, 2020. Exclusions apply to parties such as Alibaba executives, their families, and any entities they control.
Investors should be aware of notifications from securities firms or law firms handling the settlement and may need to submit applicable documentation for compensation claims. However, domestic investors may face challenges in receiving compensation, as highlighted by You Yunting, who shared past difficulties in claiming settlements involving foreign entities.
