Alibaba to ‘strive’ to keep New York listing despite addition to SEC watchlist

Alibaba said it would “strive” to keep its place on the New York Stock Exchange despite plans by the US Securities and Exchange Commission to delist the Chinese tech group among about 200 others in 2024.

The SEC on Friday added Alibaba to a list of Chinese companies that will be banned from trading if they do not provide access to audit files, driving an 11 per cent fall in the company’s New York-listed shares. Alibaba shares in Hong Kong were down 3 per cent on Monday.

Alibaba said on Monday that it would “continue to monitor market developments”. The company said it would “strive to maintain its listing status on both the NYSE and the Hong Kong Stock Exchange”.

The SEC has been adding Chinese groups to its list of companies in breach of audit disclosure rules as they file their 2021 annual reports. Alibaba filed its results last week.

China has blocked its companies and accountants from providing foreign regulators with access to audit files, despite US laws that require them to be inspected every three years.

The fate of Alibaba’s New York listing will rely on an agreement between Beijing and Washington for China to permit the US to access audit files. The company did not explain how it could otherwise maintain its US listing.

Alibaba said last week that it would upgrade its secondary listing in Hong Kong to a dual primary listing, a move analysts said would leave it in a better position should it be forced to delist in New York.

The SEC action has added to regulatory pressure on Alibaba, which has been caught in the middle of growing US-China tensions and has been hit by Beijing’s crackdown on the technology sector.

Since a 2020 peak, Alibaba’s Hong Kong-listed shares have slid more than 70 per cent. In China, the conglomerate has faced an antitrust investigation and co-founder Jack Ma has all but disappeared from public view. Ma, who stepped down as chair in 2019, is now planning to give up control of Alibaba’s sister company, Ant Group.

As the outlook dimmed domestically, Alibaba focused on international expansion. But a push into the US ecommerce market has been marred by missed targets and dozens of staff departures, the Financial Times reported last week.

Demands to open up its audit reports for inspection have further underlined the uncertainty over the company’s future in the US. Following the introduction of the Holding Foreign Companies Accountable Act in 2020, regulators can prohibit foreign companies from being traded in the US if they are unable to inspect audits for three consecutive years.

China’s fast-growing tech groups have relied on the US market to raise capital in recent years and a mass delisting could threaten up to $1.3tn of shareholder value.

But in a potential concession, Beijing has been exploring how it could bring some companies into compliance with the US regulator’s demands, the FT reported last week.

In addition to Alibaba, the SEC has said this year that it was unable to inspect or completely investigate the audits of several big Chinese tech companies, including JD.com and Baidu.

Additional reporting by Tabby Kinder in Hong Kong