China’s Alibaba struggles to maintain New York listing despite audit dispute

Alibaba Group Holding Ltd (9988.HK) said on Monday it would seek to maintain its listing on the New York Stock Exchange alongside its Hong Kong listing after the Chinese e-commerce giant was placed on a list of monitoring by US authorities.

Alibaba’s stock fell 4.5% in an almost flat Hong Kong market (.HSI) 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 U.S. Securities and Exchange Commission’s list of Chinese companies that could be delisted for failing to meet audit requirements.

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

It aims to remove foreign companies from 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 meant it was now considered to be in its first year of “non-inspection”.

“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,” he said. said in a statement to the Hong Kong Stock Exchange.

US regulators have demanded full access to audit working papers of New York-listed Chinese companies, which are stored in China.

Beijing prohibits foreign inspection of working papers of local accounting firms.

U.S. rules give Chinese companies until early 2024 to comply with audit requirements, though Congress is weighing bipartisan legislation that could speed up the deadline to 2023.

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

Alibaba said last week it planned to apply to convert its secondary listing in Hong Kong to a dual primary listing, which would make it easier for mainland Chinese investors to buy its shares.

A dual listing would allow Alibaba to apply for admission to Stock Connect, the program linking stock exchanges in Hong Kong and the mainland. Analysts have estimated that there could be $21 billion in inflows from mainland investors into Alibaba shares via Stock Connect.

Hong Kong-listed Alibaba 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 shares were listed in 2014 at $68 each and trade at $89.37.

Both sets of listed shares are down nearly 25% so far this year as the company battles the threat of delisting, ongoing Chinese tech regulations and the prospect of founder Jack Mac ceding control of the subsidiary of the company Ant Group.

Jefferies analysts described Alibaba’s share price decline as a “gut reaction” to news of a possible delisting, and added that the 2024 deadline for delisting from the Chinese American Depository Receipt gives China ample time to resolve its audit issues.

“China is serious about resolving audit issues with the United States, and talks will continue,” they wrote. agreement, Kuwaiti newspaper Alrai reported.

Meanwhile, U.S. oil production continued to rise as the number of rigs rose by 11 in July, rising for a record 23rd consecutive month, according to data from Baker Hughes.

A break in Brent prices below the key support level of $102.68 could trigger a drop into the $99.52 range to $101.26, Reuters technical analyst Wang Tao said.