The Complaint alleges that during the Class Period, Defendants issued materially false and misleading statements regarding the soundness of Alibaba Group Holding Limited’s (“Alibaba” or the “Company”) business operations, the strength of its financial prospects and concealing substantial ongoing regulatory scrutiny. Specifically, Alibaba failed to disclose that Company executives had met with China’s State Administration of Industry and Commerce (“SAIC”) in July 2014, just two months before Alibaba’s $25 billion initial public offering in the United States (the “IPO”), and that regulators had then brought to Alibaba’s attention a variety of highly dubious — even illegal — business practices. In the IPO, Alibaba and certain “selling shareholders” sold more than 368 million American Depositary Shares (“ADS”) at $68 each. The Complaint also alleges that selling shareholders included two of Alibaba’s co-founders, Jack Ma and Joseph Tsai, each of whom sold millions of shares. In addition, throughout the Class Period, Alibaba’s ADSs continued trading at ever-increasing, artificially inflated prices reaching a Class Period high of $120 each in intraday trading on November 13, 2014 and that in November 2014, the Company raised another $8 billion in a debt offering.

Furthermore, on January 28, 2015, before the opening of trading, various members of the financial media reported that SAIC had released a white paper accusing Alibaba of engaging in the very illegal conduct disclosed to Alibaba executives in July 2014. On this news, the price of Alibaba ADSs declined unusually high trading volume. Then, on January 29, 2015, before the market opened, Alibaba issued a press release announcing its financial results for the quarter ended December 31, 2014. The revenue growth missed the target defendants had led the investment community to expect and that profits declined 28% from Alibaba’s fourth quarter 2013 results. According to the Complaint, the Company blamed an inability to monetize growing transactions on its mobile platforms, where advertising is less profitable than on personal computers. As a result of these disclosures, the price of Alibaba ADSs plummeted further and collectively the two drops erased more than $11 billion in market capitalization from the ADSs Class Period high.