IN RE: ALIBABA GROUP HOLDING LTD. SECURITIES LITIGATION

Background

The court considered competing motions to appoint a lead plaintiff and lead counsel in a consolidated securities-fraud class action against Alibaba Group Holding Limited, Daniel Zhang, and Maggie Wu. The proposed class members alleged that the defendants made materially false or misleading statements and failed to disclose adverse information about Alibaba’s business, operations, and prospects.

The opinion identified several public disclosures concerning Ant Group and Alibaba between July and December 2020, including reports about regulatory meetings involving Ant Group, the suspension of Ant Group’s planned initial public offering, proposed Chinese antimonopoly rules, and an antitrust investigation into Alibaba. The opinion stated that Alibaba’s share price declined after several of these disclosures.

Lead Plaintiff Selection

Under the Private Securities Litigation Reform Act, the court applies a rebuttable presumption favoring the proposed class member who timely moves for appointment, has the largest financial interest, and preliminarily satisfies the typicality and adequacy requirements for class representation.

The court found that Salem Gharsalli established this presumption. It stated that Gharsalli timely filed his motion and appeared to have the largest financial interest among the applicants. Gharsalli claimed to have purchased 90,000 gross and net shares, spent $23,700,269.13, and suffered a net loss of $2,934,323.81. The court also found that he made the required preliminary showing that his claims were typical of the proposed class and that he could adequately represent it.

The Pension Fund argued that Gharsalli’s purchases occurred after November 2 and 3, 2020 publications that it characterized as corrective disclosures. In this context, a corrective disclosure is information that reveals the alleged fraud to the market. The Pension Fund argued that the timing of Gharsalli’s purchases could subject him to a unique defense and undermine his ability to rely on the presumption that public information was reflected in Alibaba’s stock price.

The court rejected that argument at this stage. It concluded that the November 2 and 3 publications did not reveal the alleged misstatements or omissions. The court stated that reporting a regulatory meeting and the possibility that Ant Group might not meet listing or disclosure requirements did not necessarily disclose the alleged fraud or correct Alibaba’s earlier statements. The competing applicants therefore did not rebut the presumption favoring Gharsalli. The court also found that the Pension Fund’s additional assertions about Gharsalli did not make him vulnerable to unique defenses relevant to the litigation.

The court noted that Laura Ciccarello could be added as a named plaintiff in an amended complaint if Gharsalli and his counsel chose to do so. The court did not address the Makadia/Tongbiao Group’s alternative motion because it was appointing Gharsalli.

Lead Counsel

The Private Securities Litigation Reform Act permits the most adequate plaintiff, subject to court approval, to select and retain counsel. Gharsalli selected Glancy Prongay & Murray LLP. The court approved that selection, finding that the firm’s experience indicated that it could adequately represent the class.

Disposition

Judge George B. Daniels denied the Makadia/Tongbiao Group’s and the Pension Fund’s motions for appointment as lead plaintiff and lead counsel. The court granted Gharsalli’s motion for appointment as lead plaintiff and approval of Glancy Prongay & Murray LLP as lead counsel.