By
Steve Muchoki
April 19th, 2024
Chinese tech behemoth Alibaba recently announced plans to keep its New York listing as it works towards resolving an audit dispute with US regulators.
Alibaba Group Holding Limited announced on Monday that it intends to maintain its New York Stock Exchange listing alongside its Hong Kong listing. This announcement came after US authorities placed the Chinese e-commerce giant on a delisting watchlist.
Commenting on its plans to maintain its New York listing and resolve the situation, Alibaba explained in a Monday statement:
“Alibaba will continue to monitor market developments, comply with applicable laws and regulations and strive to maintain its listing status on both the NYSE and the Hong Kong Stock Exchange.”
In addition, Alibaba stated that its addition to the list means that it is now in its first ‘non-inspection’ year.
Developments Arising from Alibaba’s Intended New York Plan
Last Friday, Alibaba became the latest to join a delisting watchlist of more than 270 firms, created by the US Securities and Exchange Commission (SEC). According to the regulatory agency, the Chinese tech giant failed to meet the auditing requirements of US-listed Chinese entities. Pursuant to the Holding Foreign Companies Accountable Act (HFCAA), Alibaba’s failure to meet the auditing requirements sees it at risk of delisting.
Following the development on Friday, Alibaba shares closed nearly 3.8% lower in a near-flat Hong Kong market. This drawdown came on the heels of the company’s 11.1% decline in New York on Friday. Furthermore, Alibaba’s latest stock slip also saw the tech giant end the month 21.4% lower overall.
Under the HFCAA, US regulators have been demanding total access to audit working papers of New York-listed Chinese companies. However, these working papers are usually stored in China, a country that bars foreign inspection of working papers from local accounting firms.
Furthermore, China also stated that both sides were working towards reaching a deal to solve the audit dispute. As it stands, US rules stipulate that Chinese firms have until early 2024 to comply with auditing requirements. However, Congress is also deliberating on bipartisan legislation that could move this deadline up to next year instead.
Alibaba Hong Kong Primary Listing
Early last week, Alibaba disclosed plans to add a primary listing in Hong Kong to its New York presence. To achieve this, the tech firm seeks to convert its Hong Kong secondary listing to a dual primary listing. This would make it easier for investors in mainland China to access Alibaba shares in a post-government crackdown era. Investors will be able to buy the company’s stock through Stock Connect, a link to the Hong Kong bourse. Commenting on this development, Louis Tse, managing director of Wealthy Securities, explained:
“Being in Stock Connect means it will be more convenient for mainland Chinese investors to eventually buy the stock, so investors are happy to step in today and buy the stock in Hong Kong.”
Furthermore, Alibaba CEO Daniel Zhang also identified Hong Kong as “the launch pad for Alibaba’s globalization strategy”. According to Zhang, the company remained fully “confident in China’s economy and future.”