SEC Says Alibaba Could Be Delisted In New York

The US financial regulator, the SEC, has added Chinese tech giant Alibaba to a list of companies that could face delisting in New York, amidst a dispute between the US and China over accounting standards.

The move, which pushed Alibaba’s shares down in both Hong Kong and New York trading on Friday, follows Alibaba’s move last week to file for a primary listing in Hong Kong.

The process, which Alibaba said would be complete by the end of 2022, would see the company’s shares having a dual-primary listing in New York and Hong Kong.

US Tiger Securities analyst Bo Pei said this “should help mitigate the delisting risk in the US”.

Delisting risk

In announcing the move Alibaba chief executive Daniel Zhang didn’t mention the delisting issue, saying instead it was looking to foster “a wider and more diversified investor base to share in Alibaba’s growth and future, especially from China and other markets in Asia”.

“Hong Kong and New York are both major global financial centers, with shared characteristics of openness and diversity,” Zhang said.

“Hong Kong is also the launch pad for Alibaba’s globalisation strategy, and we are fully confident in China’s economy and future.”

US regulators have said Chinese companies could face delisting under the Holding Foreign Companies Accountable Act (HFCAA) if they don’t follow US accounting rules, including the ability for US regulators to review the financial audits of Chinese companies.

Compliance

Regulators are demanding complete access to audit Chinese-held working papers of New York-listed Chinese companies.

KFC operator Yum China Holdings, biotech company BeiGene and tech firms Weibo and JD.com have previously been named as being at risk of delisting under the rules.

Alibaba has until 19 August to submit evidence disputing the SEC’s designation, the SEC said.