Yahoo! Inc. shareholders led by the $445 million Twin City Pipe Trades Pension Plan, St. Paul, Minn., sued the company, claiming they were misled about the restructuring of the online payment business of China's Alibaba Group Holding.
The investors, in a complaint filed Monday in U.S. District Court in San Francisco, claim Yahoo failed to tell them before May 10 that its $1 billion investment in Alibaba was “severely impaired” by the transfer of the payment business, Alipay, to a closely held company controlled by Alibaba Chairman Jack Ma.
Yahoo management was informed no later than March 31 about the restructuring, which reduced the value of its 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 said July 29 that its two biggest shareholders, Yahoo and Softbank Corp., Japan's third-biggest mobile carrier, agreed to a compensation deal that may result in Alibaba receiving as much as $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.
The sale of the online payment business to Mr. Ma's company last year lacked the approval of the board and was only disclosed to investors in March, Yahoo said previously.
Dana Lengkeek, a Yahoo spokeswoman, had no immediate comment Monday.