Yahoo has been sued by shareholders claiming the owner of the biggest US web portal misled them about the restructuring of Alipay, the online payment business of China's Alibaba Group Holding.
The investors, in a complaint filed yesterday in federal court in San Francisco, claim the search-engine provider failed to tell them before May 10 that its US$1 billion investment in Alibaba was "severely impaired" by the transfer of Alipay to a company controlled by Alibaba chairman Jack Ma.
Yahoo management was informed by March 31 of the restructuring, which reduced the value of the California-based company's investment in Alibaba by billions of dollars, according to the complaint.
Chinese regulations that precipitated the restructuring were anticipated in 2009, requiring "Yahoo or Alibaba to divest themselves of Alipay but Yahoo had failed to develop a strategy to recover the value it had in Alibaba," according to the suit.
Alibaba, based in Hangzhou, said on July 29 that its two biggest shareholders, Yahoo and Softbank, Japan's third-biggest mobile carrier, agreed to a compensation deal that may result in Alibaba receiving as much as US$6 billion from Alipay. The agreement ended a four-month dispute between Alibaba, China's biggest e-commerce company, and foreign shareholders over the spinoff of Alipay.
