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

China's Alibaba scrambles to keep New York listing amid audit dispute
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Alibaba Group’s logo for is on the trading floor of the New York Stock Exchange in Manhattan, New York City, U.S., March 8, 2021. REUTERS/Andrew Kelly/File Photo

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Aug 1 (Reuters) – Alibaba Group Holding Ltd (9988.HK) on Monday said it would work 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 delisting watch list by US authorities.

Alibaba stock lost 4.5% in a near-flat Hong Kong market (.HSI) 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 US Securities and Exchange Commission’s list of Chinese companies at risk of delisting for failing to meet audit requirements. Continue reading

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The Holding Foreign Companies Accountable Act (HFCAA) aims to address a long-standing dispute over the audit compliance of US-listed Chinese companies.

It aims to remove foreign companies from US stock exchanges if they fail to comply with American auditing standards for three years in a row.

Alibaba said on Monday that inclusion on the list means it is now in its first “non-inspection” year.

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

US regulators are demanding full access to New York-listed Chinese companies’ audit working papers held in China.

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

U.S. regulations give Chinese companies until early 2024 to meet the audit requirements, although Congress is considering bipartisan legislation that could bring the deadline back to 2023.

China 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 Hong Kong secondary listing to a dual primary listing, which would make it easier for mainland Chinese investors to buy its shares. Continue reading

A dual listing would allow Alibaba to seek admission to Stock Connect, the system linking Hong Kong and mainland stock exchanges. Analysts estimate that mainland investors could have inflows into Alibaba stock worth $21 billion via Stock Connect.

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Hong Kong-listed Alibaba shares are down 49% from HK$176 at the time of the secondary listing in November 2019 to HK$90.15 on Monday. In New York, its shares were listed at $68 a share in 2014 and are trading at $89.37.

Both listed stocks are down nearly 25% so far this year as the company battles delisting threats, ongoing Chinese tech regulation and the prospect of its founder Jack Ma ceding control of subsidiary Ant Group.

Analysts at Jefferies called Alibaba’s share price drop a “knee-jerk reaction” to news of a potential delisting, adding that the 2024 deadline for Chinese American Depository Receipts’ delisting gives China ample time to resolve its auditing issues.

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

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

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