Due to American regulators’ inability to access accounting audits, Alibaba Group Holding Ltd. (NYSE: BABA) has taken a step toward being delisted from the US stock markets.
Alibaba risks being delisted from US Exchanges
The US SEC added the biggest US-listed Chinese corporation on Friday to a widening list of companies that risk being delisted due to Beijing’s refusal to let American officials examine the work of its auditors. A law from 2020 mandated the publishing of the companies’ identities, which starts a three-year countdown to a final delisting.
The SEC’s action heightens investors’ worries, which already included a wide range of issues like earnings risk, the implications of Jack Ma allegedly giving up ownership of his fintech subsidiary Ant Group Co., and enduring Covid-19 hazards in China. The US-listed stock of Alibaba has fallen 21% in July, the worst month ever since November last year, and has continued to fall for the third week.
According to Vital Knowledge’s founder, Adam Crisafulli, sentiment has once again soured in China. The top regulator on Wall Street is taking action against New York-traded corporations with holding companies domiciled in Hong Kong and China.
Numerous other nations allow the US to conduct audit inspections, enabling American officials to speak with local accountants and carefully examine the supporting paperwork for their work. Due to national security and confidentiality requirements, Hong Kong and China have declined.
Chinese firm moving primary listings to Hong Kong
A few Chinese companies, including Kingsoft Cloud Holdings Ltd. and Alibaba, have announced this week that they are looking for primary placements in Hong Kong, following Zai Lab Ltd and Bilibili Inc., which took the same action earlier. The change might help businesses attract more Chinese investors while also serving as a model for other Chinese firms that are listed on US exchanges and risk being delisted if Washington and Beijing are unable to resolve audit disagreements.
If regulators are unable to come to an agreement, Alibaba is likely to be the biggest Chinese business to be delisted from US stock exchanges.