China’s Alibaba is striving to keep its New York listing amid audit disputes

The logo of Alibaba Group is seen on the trading floor of the New York Stock Exchange in Manhattan, New York City, U.S., August 3, 2021. REUTERS/Andrew Kelly/File Photo

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

Alibaba shares fell 4.5% in a near-flat Hong Kong ( .HSI ) market in early trade, following Friday’s 11.1% decline in New York.

The company on Friday became the latest of more than 270 firms to be added to the US Securities and Exchange Commission’s list of Chinese companies that may be delisted for failing to meet audit requirements. read more

The Holding Foreign Companies Accountable Act (HFCAA) is intended to resolve a long-running dispute over audit compliance by US-listed Chinese firms.

It aims to delist foreign companies from US exchanges if they fail to comply with US auditing standards for three consecutive years.

Alibaba said on Monday that being added to the list meant it was now considered to be in its first “non-inspection year”.

“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,” it 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 prevents foreign inspection of working papers of local accounting firms.

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

China has said both sides are committed to reaching an agreement to resolve the audit dispute.

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

A dual listing will allow Alibaba to apply for admission to Stock Connect, the scheme linking Hong Kong and mainland exchanges. Analysts estimated that there could be an inflow of $21 billion from mainland investors into Alibaba shares through Stock Connect.

Alibaba’s Hong Kong-listed shares have fallen 49% from HK$176 in the secondary listing in November 2019 to HK$90.15 on Monday. In New York, the shares were listed in 2014 at $68 each and trade at $89.37.

Both sets of publicly traded shares are down nearly 25% so far this year as the company battles the threat of a delisting, ongoing Chinese technology regulation and the prospect that founder Jack Ma will relinquish control of the firm’s affiliate Ant Group.

Analysts at Jefferies described Alibaba’s share price drop as a “reaction” to the news of a potential delisting, adding that the 2024 deadline for the delisting of Chinese American Depositary Receipts gives China sufficient time to resolve its audit issues.

“China is serious about wanting to resolve the audit issues with the United States and talks will continue,” they wrote.

Reporting by Scott Murdoch in Hong Kong and Josh Horwitz in Shanghai; Editing by Christopher Cushing

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