China’s Alibaba is scrambling to keep its New York listing amid audit dispute

The Alibaba Group logo appears on the trading floor of the New York Stock Exchange in Manhattan, New York City, US, August 3, 2021. REUTERS/Andrew Kelly/File Photo

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Aug 1 (Reuters) – Alibaba Group Holdings Limited (9988.HK) said on Monday it would keep its listing on the New York Stock Exchange as well as its Hong Kong listing after US authorities placed the Chinese e-commerce giant on a watch list for delisting. .

Alibaba’s stock fell 4.5% in the Hong Kong semi-stable (.HSI) market in early trading, after falling 11.1% in New York on Friday.

The company on Friday became the latest of more than 270 companies to be added to the US Securities and Exchange Commission’s list of Chinese companies that may be delisted for failing to meet audit requirements. Read more

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The Foreign Holding Company Accountability Act (HFCAA) aims to address a long-running dispute over audit compliance for Chinese companies listed in the United States.

It aims to drive foreign companies out of US stock exchanges if they fail to comply with US auditing standards for three consecutive years.

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

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

US regulators are demanding full access to audit working papers of Chinese companies listed in New York, and stored in China.

Beijing bans foreign inspection of working papers from domestic accounting firms.

US rules give Chinese companies until early 2024 to comply with audit requirements, although Congress is considering bipartisan legislation that could speed up the deadline to 2023.

China said the two sides are committed to reaching an agreement to resolve the review dispute.

Alibaba said last week that it intends to file an application to convert its secondary listing in Hong Kong into a primary dual listing, which will make it easier for Chinese investors to buy its shares. Read more

The dual listing will allow Alibaba to apply for admission to Stock Connect, the scheme that links the Hong Kong and mainland exchanges. Analysts have estimated that there could be $21 billion in flows from mainland investors into Alibaba stock through Stock Connect.

Alibaba’s Hong Kong-listed shares fell 49% from HK$176 at the time of its secondary listing in November 2019 to HK$90.15 on Monday. In New York, its stock was listed in 2014 at $68 a share and is trading at $89.37.

Both groups of listed stocks are down about 25% so far this year as the company battles the threat of delisting, ongoing Chinese technology regulations and the prospect of founder Jack Ma relinquishing control of the company’s Ant Group.

Analysts at Jefferies described Alibaba’s drop in share price as a “indirect reaction” to news of the potential delisting, and added that the 2024 deadline to write off China-US depository receipts gives China enough time to resolve its own audit issues.

“China is serious about its desire to resolve scrutiny issues with the United States, and talks will continue,” they wrote.

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Additional reporting by Scott Murdoch in Hong Kong and Josh Horowitz in Shanghai; Editing by Christopher Cushing

Our Standards: Thomson Reuters Trust Principles.

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