China’s Alibaba Tries to Maintain New York Listing Amid Audit Controversy

Alibaba Group Holding Ltd (9988.HK) said on Monday that it will remove its Hong Kong listing as well as its New York Stock Exchange listing after the Chinese e-commerce giant was placed on a delisting watchlist by US authorities. Will work to maintain,

Alibaba stock was down 4.5% in a nearly flat Hong Kong market (.HSI) in early trade, after falling 11.1% in New York on Friday.

The company on Friday became the latest of more than 270 firms to join the US Securities and Exchange Commission’s list of Chinese companies that could be delisted for not meeting auditing requirements.

The Holding Foreign Companies Accountable Act (HFCAA) aims to address the long-running dispute over auditing compliance of US-listed Chinese firms.

It aims to remove foreign companies from US exchanges if they fail to comply with US auditing standards for three consecutive years.

Alibaba said on Monday that its inclusion on the list means it is now considered to be in its first “non-observation” year.

“Alibaba will continue to monitor market developments, comply with applicable laws and regulations and endeavor to maintain its listing status on both the NYSE and the Hong Kong Stock Exchange,” it said in a statement to the Hong Kong Exchange.

US regulators are seeking full access to audit working papers of Chinese companies listed in New York that are stored in China.

Beijing has banned foreign inspection of working papers from local accounting firms.

US rules give Chinese companies until early 2024 to comply with auditing requirements, though Congress is weighing bipartisan legislation that could extend that deadline to 2023.

China has said that the two sides are committed to reaching an agreement to resolve the audit dispute.

Alibaba said last week it planned to apply to convert its Hong Kong secondary listing into a dual primary listing, which would make it easier for mainland Chinese investors to buy its shares. read more

A dual listing would allow Alibaba to apply for entry into Stock Connect, a scheme linking the Hong Kong and mainland exchanges. Analysts estimate that Alibaba stock could see $21 billion in inflows from mainland investors via Stock Connect.

Alibaba’s Hong Kong-listed shares have fallen 49% to HK$90.15 on Monday from HK$176 at the time of its secondary listing in November 2019. Its shares in New York were listed in 2014 at $68 each and are trading at $89.37.

Both sets of listed shares are down about 25% so far this year as the company grapples with the delisting threat, ongoing Chinese technical regulation and the prospect of its founder Jack Ma taking control of the firm’s affiliate Ant Group.

Analysts at Jefferies described the drop in Alibaba’s share price as a “knee-jerk reaction” to news of a potential delisting and said the 2024 deadline for delisting Chinese American Depository Receipts would require China to address its audit issues. Gives enough time to solve.

“China is serious about resolving audit issues with the US and talks will continue,” he wrote.

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