The USSecurities and Exchange Commission (SEC) included Alibaba Group in a list of companies at risk of delisting from the New York Stock Exchange on Friday, July 29, 2022. The decision was made under the Holding Foreign Companies Accountable Act ( HFCAA) entitling the regulatory authority to strike off foreign companies that do not comply with the rules of financial inspections. In essence, the SEC accuses the Chinese e-commerce giant of refusing to hand over all of its financial documents and its audit report. Consequently, it gives him 15 working days to contest this sanction and regularize his situation, at the risk of being expelled.
Alibaba and 300 other foreign companies in the crosshairs of the SEC
Like many Chinese and Hong Kong companies such as Boqii, Cheetah Mobile, MOGU, Highway Holdings, or Novagant Corp, Alibaba Group has been included in the provisional list of 300 companies (approximately) that may be banned from listing on the NYSE. According to the SEC, the firm failed to respect the regulator’s right to access its audit report for its first fiscal year which ended March 31, 2022.
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In accordance with the HFCAA Act of 2021, the SEC is authorized to carry out an annual audit (over 3 consecutive years) of the accounts of foreign companies, through the Public Company Accounting Oversight Board (PCAOB), an independent institution responsible for overseeing audits brokers.
The announcement immediately impacted Alibaba’s share price, which fell from $100.52 to $89.37 within a day. Faced with this disappointment, the e-commerce company indicated that it ” will continue to monitor market developments, comply with applicable laws and regulations, and strive to maintain its NYSE listed status ».
Several alternatives for Alibaba
The notice of “no inspection” posed by the SEC on the case of Alibaba will not have a direct consequence on its stock market activities on the NYSE. The company has the right to correct its irregularity and grant the audit documents for the following two years, until the spring of 2024, to escape deregistration.
Alibaba has also provided an alternative solution to maintain its activities on the stock exchange. Last week, it announced its ambition to claim a second primary listing on the stock exchange by targeting the HKEX (Hong Kong Stock Exchange).
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