The Alibaba Group has been battling regulators in China for several years. A situation that has negatively affected the company on numerous occasions. Now you have a new threat: the US Securities and Exchange Commission includes the company on a delisting list.
In the US, officials carry out audits in a dozen countries, for this, they need to interview local accountants and examine the documentation of the companies, as indicated by law. Nevertheless, China and Hong Kong have refused to share dataciting confidentiality laws and national security concerns.
Foreign Business Liability Act (HFCAA)
At the end of 2020, the United States passed the Foreign Company Accountability Act (HFCAA), which requires Chinese companies to comply with the audit requirements of the US stock market. The term will end in 2024.
The law was passed to prevent Beijing from banning US regulators from reviewing the documents for the audit. But still they still do not have access to the data.
Beijing has argued with US regulators to reach an agreement, but the chairman of the Securities and Exchange Commission, Gary Genslerhas said that it will be very difficult for this to be possible.
Jack Ma’s company is not the only one on this list, there are already more than 150 companies (among them are also other famous ones such as pinduoduo) those that have been appointed by the SEC to be expelled from US exchanges. The reason, in most cases, the inability of US regulators to inspect the data.
Alibaba Group goes public
The news from the SEC has been the main incentive for the Chinese e-commerce giant to fall 10% on the stock market on July 29. However, this is not the only negative situation that the company has had to face this week. They have also been impacted by Jack Ma’s transfer of control of his fintech arm Ant Group and the problems they continue to have in China due to Covid.
All these situations have led to Alibaba Group shares listed in the United States extending their falls for three weeks, which means a 21% crash in July. This would be his worst month since November 2021.
The measure that many companies, including Alibaba Group, could be considering, and that some companies have already taken, is to make the first listings in Hong Kong. This change will bring new benefits for companies that take this measure, such as new Chinese investors.
Alibaba would be the largest Chinese company to be delisted from US stocks. For this reason, the company is asking the regulators and the government to reach an agreement.
