China’s Alibaba tries to keep New York listing amid audit dispute

China's Alibaba tries to keep New York listing amid audit dispute
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Alibaba Group’s logo is seen on the trading floor of the New York Stock Exchange in Manhattan, New York City, USA, August. 3, 2021. REUTERS/Andrew Kelly/File Photo

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1 August (Reuters) – Alibaba Group Holding Ltd. (9988.HK) On Monday, the Chinese e-commerce giant said it would work to maintain its listing on the New York Stock Exchange alongside the listing in Hong Kong after it was placed on a delisting watchlist by US authorities.

Alibaba stock fell 4.5% in a nearly flat Hong Kong market (.HSI) It’s in early trade 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 list of Chinese companies that could be delisted for failing to meet the US Securities and Exchange Commission’s audit requirements. Read more

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The Holding Foreign Companies Liability Act (HFCAA) aims to address a longstanding dispute over the audit compliance of US-listed Chinese firms.

It aims to remove foreign companies that do not comply with American auditing standards for three consecutive years from the US stock exchanges.

Alibaba on Monday said its addition to the list means it is now accepted in its first ‘out of audit’ year.

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

US regulators require full access to audit working papers of Chinese companies listed in New York stored in China.

Beijing has banned foreign auditing of working papers from local accounting firms.

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

China said both sides are determined to reach an agreement to resolve the supervisory dispute.

Alibaba said last week that it plans to apply to convert its Hong Kong secondary listing to a dual primary listing that would make it easier for mainland Chinese investors to buy its shares. Read more

A dual listing will allow Alibaba to apply for admission to Stock Connect, the scheme that connects the Hong Kong and mainland stock markets. Analysts estimate $21 billion inflows into Alibaba stock from mainland investors via Stock Connect.

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Alibaba’s shares traded in Hong Kong fell 49% to HK$90.15 on Monday, from HK$176 at the time of secondary listing in November 2019. In New York, its shares were trading at $68 each in 2014 and were trading at $89.37 each.

Both stocks are down nearly 25% so far this year as the company struggles with the threat of delisting, continued Chinese tech regulation, and the possibility that founder Jack Ma will cede control of the company’s subsidiary, Ant Group.

Analysts at Jefferies described Alibaba’s share price decline as a “knee-jerk response” to news of a possible delisting, adding that the 2024 deadline for delisting of the Chinese American Depositary Receipt gives China ample time to resolve its regulatory issues.

“China is serious about resolving its control issues with the US and talks will continue,” they wrote.

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reporting by Scott Murdoch in Hong Kong and Josh Horwitz in Shanghai; Edited by Christopher Cushing

Our standards: Thomson Reuters Trust Principles.

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