Alibaba added to watch list of Chinese firms facing expulsion from US exchanges, days after primary listing bid in Hong Kong
- The US Securities and Exchange Commission on Friday put Alibaba on its watch list of Chinese firms that face removal from American exchanges
- More than 150 Chinese companies are currently on the SEC’s provisional line-up of firms up for delisting
Under that law, foreign companies may be delisted if they fail to submit their audit papers to a US accounting oversight body for three consecutive years. This means the three-year countdown for Alibaba to comply with the requirement has started.
The SEC’s move sent Alibaba’s American depositary shares down 11 per cent on Friday to close at US$89.37. The company has lost nearly two-thirds of its valuation since its peak in late 2020 amid regulatory pressures in both China and the US, and a weakening global macroeconomic environment.
There were 261 Chinese companies, with a total valuation of US$1.3 trillion, listed on major US stock exchanges at the end of March, according to a report by the US-China Economic and Security Review Commission.
Alibaba seeks Hong Kong primary listing for Stock Connect access
With its inclusion to the SEC’s delisting watch list, Alibaba’s plan to upgrade its Hong Kong stock exchange presence from a secondary to a primary listing before the end of this year proved prescient.
A primary listing in the city could mitigate the risks and uncertainty involving the US audit requirement, enabling Alibaba to continue being a publicly traded company in case it gets removed from the New York Stock Exchange.
SEC’s Gensler says up to China to grant audit access to prevent delistings
Apart from the US auditing requirement, compliance issues related to China’s new data regulations further complicate the position of Alibaba and other overseas-listed Chinese firms, according to Paul Haswell, a partner who advises technology companies at international law firm Seyfarth Shaw in Hong Kong.
“While Alibaba’s plan to have a primary presence in Hong Kong appears to be intended to mitigate against delisting in the US, China’s new data laws make it much harder for companies holding a lot of Chinese data – as Alibaba does – to be listed overseas because of the various compliance hoops they now have to jump through,” Haswell said.