Alibaba faces renewed regulatory scrutiny in the U.S. from the Securities and Exchange Commission.
Greg Baker/AFP via Getty Images
Chinese tech giant
stock price was on a roller coaster again as the company faces off against the risk of forced delisting in the U.S.
U.S.-listed shares of
(ticker: BABA) gained 2% in premarket trading on Monday after the stock tumbled 11% on Friday.
Behind Friday’s plunge was news that Alibaba had been identified by the Securities and Exchange Commission as a U.S.-listed Chinese company at risk of being delisted in New York if it doesn’t meet auditing requirements. A rebound on Monday came amid a lift in investor sentiment following a response from the company.
“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,” Alibaba said in a statement to the Hong Kong Stock Exchange on Monday.
Regulatory pressures in both the U.S. and China have taken a beating to Alibaba and shares of many other U.S.-listed Chinese technology companies amid a focus from Washington on disclosure rules and a crackdown in Beijing on the country’s fast-growing tech sector.
Shares in Alibaba lost almost 50% of their value in 2021 alone and have fallen a further 25% in 2022, even as many analysts remain upbeat that the worst scrutiny is over and the sector is on track for a recovery.
The SEC’s targeting of Alibaba marks the latest installment in applying the Holding Foreign Companies Accountable Act, which became law in 2020 and requires some foreign companies to be more transparent in making accounting documents available.
Chinese companies are among the main targets, and delisting is the ultimate cost of noncompliance. Alibaba last week said it was pursuing a primary listing in Hong Kong, which would make it a dual primary-listed stock in Hong Kong and New York.
While China has signaled that it would cooperate with the U.S. in reaching common ground on accounting and audit rules, proof of that has largely failed to materialize. Alibaba’s latest roller coaster is a reminder that the ride isn’t yet over.
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