New | Alibaba under probe by US SEC over accounting practices as its shares tank almost 7 per cent
Chinese e-commerce titan says it is cooperating with US regulators
Chinese e-commerce giant Alibaba wowed investors when it went public in the US in September 2014, and its profits have bucked Wall Street expectations amid the Chinese economy’s slowdown. Yet its unorthodox business structure has raised eyebrows, it’s been suspended from an anti-counterfeiting group, and now US regulators are investigating its accounting practices.
Alibaba disclosed in a regulatory filing that the US Securities and Exchange Commission has requested documents and information related to the way it adds together earnings from its various divisions, and how it reports transactions with other companies it has a stake in, among other things.
“The financial disclosure we are providing to investors relating to Cainiao Network in our 20-F on pages 122-123 (revenues, net loss and balance sheet items) is exactly the kind of robust and transparent information that will address the underlying issues in SEC’s inquiry,” a spokesman for Alibaba told the South China Morning Post in Shandong when asked about the iniquity. The 20-F is the firm’s annual report.
“I think it’s a moment of truth for the company,” said Anant Sundaram, a finance professor at Tuck School of Business at Dartmouth College. “If I’m buying into that stock, what am I buying into?”
US-traded shares in Alibaba tumbled in heavy trading Wednesday after news surfaced of the SEC probe. Alibaba shares fell 6.8 per cent or US$5.53 to end Wednesday at US$75.59, the lowest close for the company since the middle of March. More losses were posted in after-hours trading in New York. Alibaba stock is down 20 per cent in the past year.
