On October 25, 2023, Alibaba Group Holding Limited (Alibaba) announced that it would pay US$433.5 million (approximately RMB 3.089 billion) to reach a class action settlement agreement with US investors. The settlement case originated from a class action lawsuit filed by US stock investors against Alibaba in 2020, accusing Alibaba of suspected monopoly. However, Alibaba insisted that it did not violate antitrust laws and unfair competition laws, and its choice of settlement was purely to avoid the costs and operational disruptions caused by lengthy legal disputes.

Behind the settlement of up to US$430 million

According to the settlement agreement, investors who held Alibaba US stocks between November 13, 2019 and December 23, 2020 can enjoy settlement compensation. The plaintiff's lawyer team stated in court documents that the amount of compensation brought by this settlement agreement is an "extraordinary achievement" in similar cases, far exceeding the average compensation of similar size in most securities class actions. The lawyer further pointed out that if the lawsuit continues, the maximum amount of compensation Alibaba faces may reach 11.63 billion US dollars (about 82.881 billion yuan), so settlement is also a more economical option for Alibaba.

Alibaba said in the announcement that once the settlement agreement is approved by the court, it will help the company avoid further litigation costs and business disruption. In fact, in recent years, American investors have frequently filed class action lawsuits against foreign companies listed in the United States, and settlement is often the best choice for these companies to reduce losses.

Market reaction and stock price performance

After the settlement news was released, Alibaba's stock price reached 97.42 US dollars per share at the close of October 25, with a market value of 233.319 billion US dollars (about 1.66 trillion yuan). This news has caused heated discussions on Chinese social media. Many netizens have discussed the securities class action system under the US legal system, believing that the US legal framework provides more ways for investors to protect their rights.

Hot discussion among netizens: Comparison of the rights protection methods of Chinese and American investors

Once the news of Alibaba's 430 million US dollar settlement was released, it attracted widespread attention. Chinese netizens envy the fact that American investors can jointly sue listed companies and obtain compensation. Netizen "Hubei Lichuan Sumadang Yaya Xiaozhu B&B" commented, "I often see the United States suing many companies, and the compensation amount is not cheap, but I seem to have never seen similar situations in China. Is it because the laws are different?" A netizen from Zhejiang replied, "Our country also has antitrust laws, but the fines are directly paid to the treasury and have little to do with ordinary people." Many comments believe that the US securities market has a sound legal system and investor protection mechanism to ensure a fair and just market environment. Netizen "Integrity Prospers the Country and Prospers the Family" bluntly said: "The rise of the US stock market is based on a fair and just healthy system."

Another netizen "Grey Wolf" suggested that domestic stockholders should also learn from American stockholders, collectively defend their rights through legal means, sue listed companies suspected of illegal profits, and seek compensation. Netizen "Rumeng Ruping" sighed: "The happiness index of American stockholders is really high!"

At the same time, some netizens also raised questions about the specific calculation basis of the settlement amount? For example, netizen "Liang Bai Kai" asked: "How was the settlement amount of $430 million determined? The amount is indeed huge, but it seems to be reasonable."

Background and Impact of the U.S. Class Action System

In the United States, securities class actions are a common way for investors to protect their rights. When investors believe that a company is suspected of misleading or violating securities laws, they can seek financial compensation through class actions. This system allows a large number of investors to jointly sue, avoiding the high litigation costs faced by individual investors. In the Alibaba case, the plaintiff's lawyer believed that the continuation of the lawsuit may bring higher compensation, so settlement is a more realistic option for all parties.

In recent years, more and more Chinese companies have faced class actions in the United States for various reasons. For example, in the early days of the listing of Chinese concept stocks, some investors will file lawsuits due to insufficient information disclosure of the company, or initiate class actions when the stock price falls, claiming that the company has failed to fully and accurately disclose financial or operating information. In this case, although settlement does not mean that the company admits to illegal behavior, it often becomes a way to calm the situation.

Alibaba's response and future prospects

Faced with legal risks in the U.S. market, Alibaba's settlement choice is both a guarantee of shareholder interests and part of corporate business decision-making. Chinese companies listed in the United States are gradually realizing the need to increase the transparency of information disclosure and actively deal with possible legal disputes. For giants like Alibaba, it is particularly important to maintain a stable relationship with the global market and reduce the costs of legal disputes.

With the changes in the international financial environment and the continuous tightening of regulatory policies, Alibaba and other Chinese companies listed in the United States may be more cautious in handling their business in the United States in the future to avoid legal difficulties due to improper information disclosure.