SEC Probes Alibaba Over Accounting Practices

Alibaba

Alibaba said it was voluntarily providing regulators with all details of its reporting practices.

The Chinese e-commerce giant, Alibaba Group is under investigation from the United States Securities and Exchange Commission over allegations that the online company’s account practices have violated federal securities laws.

The company’s annual filing with the Securities and Exchange Commission on Wednesday revealed that it is cooperating with the agency and is providing all pertinent documents and information about its policies regarding consolidating affiliated companies as well as its practices for related-party transactions.

The online business conglomerate also said that the company is providing all the details of its reporting practices surrounding its Single’s Day where the company is very vocal about the total amount of goods that their affiliate vendors sell on their sites.

Single’s Day is China’s e-commerce holiday in November attracting more than 90 billion yuan ($13.7 billion) in sales on its e-commerce platforms in a 24-hour period last year, making it Alibaba’s biggest shopping day.

Alibaba added that cooperation with the securities regulators was voluntary and that the investigation does not confirm the company’s violation of any laws.

“The SEC advised us that the initiation of a request for information should not be construed as an indication by the SEC or its staff that any violation of the federal securities laws has occurred,” the company said. “This matter is ongoing, and, as with any regulatory proceeding, we cannot predict when it will be concluded.”

It is yet to be revealed how much the investigation would impact Alibaba. When asked to comment on the issue, a company spokeswoman repeated Alibaba’s statement to the Securities and Exchange Commission.

The share price of Alibaba has been stable in recent months. Following its initial public offering on the New York Stock Exchange, its shares jumped up, but then quickly fell below the initial price as  investors grew concerned about the company missing earnings targets, the slowdown of China’s economic growth, as well as Alibaba’s investments.

The Hangzhou, China-based company announced a new chief executive last year.

The company has been showing strong revenue growth in the most recent quarter despite growing concerns about the Chinese economic slowdown.

The Securities and Exchange commission is focusing their investigation on a similar concern to what was raised by some short sellers and by research company, Pacific Square Research last year. Specifically, the research company raised questions over whether or not Alibaba should consolidate its logistics affiliate, Cainiao Smart Logistics Network. Alibaba is said to have a 47 percent stake in its logistics affiliate.

Alibaba also said in its filing on Tuesday that the company has provided the securities regulators the information regarding its accounting for Cainiao.

Shares of Alibaba were at $79.35 in early trading in New York down 2.2 percent. Year to date, the company has gone down 0.2 percent through Tuesday versus the S&P 500’s gain of 1.6 percent.

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