Plainti ff s ‐ Appellants Ltd., Tai William, Abel Amoros, Arthur Gabriel, Raymond Lee, individually and behalf all others similarly situated, and Movant Appellant Gang Liu (collectively, “Plainti s”) appeal judgment United States District Court Southern District New York (McMahon, J. ) dismissing their class action complaint behalf those who purchased American Depository Shares (“ADSs”) call options purchase ADSs Group Holding Limited (“Alibaba”) between September and January 2015. defendants named and most senior executives: founder and Executive Chairman Jack Yun Ma, co founder and Executive Vice Chairman Joseph Tsai, Chief Executive O cer director Jonathan Zhaoxi Lu, Chief Financial O cer Maggie Wei Wu (“Individual Defendants,” collectively with Alibaba, “Defendants”). sued securities fraud connection initial ering (“IPO”) securities, violation Sections 10(b) 20(a) Securities Exchange Act U.S.C. §§ 78j(b), 78t(a), 10b C.F.R. 240.10b dismissed Fed. R. Civ. P. 12(b)(6), ruling failed state claim upon relief could granted. We *3 assume the parties’ familiarity with the procedural history and speci fi cation of issues for review.

We review de novo a dismissal under Rule 12(b)(6). Stra e McClure v. Morgan Stanley , 776 94, 99—100 2015). Securities fraud claims must meet the pleading requirements set forth in Fed. R. Civ. P. 9(b) and Private Securities Litigation Reform Act (the “PSLRA”), 15 U.S.C. § 78u 4(b). ATSI Commc’ns, v. Shaar Fund, Ltd. , 493 87, 99

To state a claim Section 10(b) 10b 5, plainti ff  must allege that defendant (1) misstatements or omissions of material fact, (2) with scienter, (3) connection with purchase sale of securities, (4) upon which plainti ff  relied, (5) that plainti ’s reliance was proximate cause of its injury.” ATSI As to elements of claim, a complaint must satisfy test of Ashcroft v. Iqbal requires that it “contain su cient factual ma er, accepted as true, to ‘state a claim to relief that is plausible on its face.’” U.S. (2009) (quoting Bell Atlantic Corp. Twombly U.S. (2007). As for element scienter, PSLRA imposes more rigorous requirement that a complaint must “state with particularity facts giving rise to inference” required state mind. U.S.C. 78u ‐ 4(b)(2)(A). A “strong inference” scienter one “cogent least as compelling any opposing one could draw facts alleged.” Tellabs Maker Issues & Rights (2007). dismissed s’ Section 10(b) claim for failure to plead adequately supporting fi rst two elements, dismissed Section 20(a) claim for failure to allege an underlying violation securities laws. This error.

As to each defendant, complaint alleges complicity misstatements omissions material fact. alleges public disclosures relating its IPO concealed fact that, July months prior high level cials China’s “powerful” State Administration Industry Commerce (“SAIC”) summoned Alibaba an administrative guidance meeting. Although SAIC administrative guidance proceedings “are open ma er [Chinese] law,” this meeting conducted secret “to avoid exposing any negative information might ect progress upcoming IPO.” At meeting, warned unless ceased host marketplace sale counterfeit goods website, would subjected huge repeating fi nes 1% daily gross merchandise value sold e commerce platforms. asserts information highly material investors because threat required choose between giving up an important source revenue risking enormous fi nes, where either outcome would signi fi cant *4 negative impact Alibaba’s revenues the success IPO. importance of information to investors illustrated by the fact that, when was revealed four months subsequent to the IPO, Alibaba’s stock dropped 13% in days, erasing $33 billion in market capitalization. IPO raised $25 billion the largest in history. Given the eventual market reaction to revelation the information that time revelation would likely have had a multi billion dollar negative e ff ect. alleged omi tt ed constituted material information substantial interest

to prospective investors in company’s planned initial public ff ering (“IPO”). See, e.g. , Basic v. Levinson , 485 231—32 (1988) (materiality requires substantial likelihood that disclosure omi tt ed fact would been viewed by reasonable investor as having signi fi cantly altered ‘total mix’ information available” (citation omi tt ed)). Accepting Plainti ff s’ allegations as true, had duty to disclose these facts, in manner accurately conveyed seriousness problems faced, so not to render Defendants’ disclosures “inaccurate, incomplete, misleading.” See Stra tt e McClure , 776 F.3d For substantially same reasons, had duty disclose under Regulation S ‐ K, 27 C.F.R. 229.10 (“Item 303”).

In dismissing complaint, district court inappropriately discredited signi fi cant allegations Plainti ff s’ claims relied, failing treat light most favorable Plainti ff s, draw reasonable inferences Plainti s’ favor, required respect motion dismiss 12(b)(6). Kleinman v. Elan Corp. (2d Cir. For example, accepted argument rapid withdrawal SAIC’s White Paper meant paper “unauthorized and, hence, not be trusted,” v. Group Holding Ltd. F. Supp. 3d. (S.D.N.Y. 2016), rather than crediting s’ pro ered reasonable withdrawal resulted from fl uence over Chinese regulators. pleads scienter. scienter analysis has no bright line rules. It can established by showing “strong circumstantial evidence conscious misbehavior recklessness.” Indiana Public Retirement System 2016) (citation omi ed). Among ways demonstrating circumstantial evidence by detailing “reckless disregard known obvious duty disclose,” id ., including “conduct highly unreasonable, representing an extreme departure standards ordinary care,” Advanced Ba ery Tech. Bagell 2015) (citation omi ed), such *5 “danger either known defendant so obvious defendant must been aware it.” Rothman Gregor 2000) (citation omi tt ed).

Considering “ facts alleged, taken collectively,” Tellabs at adequately plead strong circumstantial evidence scienter. July secret meeting conducted by ended by high level Alibaba cers, including Chief Risk O cer (and Partner) Xiaofeng Shao, well senior managers each primary business units. alleges managers business units who ended meeting reported directly Lu Wu. Considering high level nature meeting, seniority endees, conduct secret, huge potential impact SAIC’s threat at meeting imminent virtually inconceivable threat not communicated senior level management, i.e. individual Defendants.

Defendants’ subsequent failure disclose meeting true about threat company had been communicated by government China. This omission rises least reckless disregard known obvious duty disclose,” Indiana Public Retirement System thus powerfully supports acted scienter. individual Defendants’ mental states imputed Alibaba, therefore also pleads Alibaba. See Teamsters Local Freight Division Pension Fund Dynex Capital judgment VACATED case REMANDED

further proceedings. THE COURT:

Catherine O ʹ Hagan Wolfe, Clerk

[1] Clerk Court respectfully directed amend caption above.