Alibaba Group Holding Ltd (BABA) Accounting Practices Under SEC Investigation


Shares of Alibaba Group Holding Ltd fell nearly 7% today following reports the company is under investigation by the United States Securities and Exchange Commission (SEC) over its accounting practices. In the company’s annual filing, it was revealed that the SEC was investigating whether the company’s accounting practices might have violated federal securities laws.

Alibaba voluntarily cooperates with the SEC

Alibaba submitted its annual report to the SEC on Tuesday. The company said in the filing that it provided the agency with documents and information regarding its consolidation policies, practices, transactions, as well as operating data from Singles Day, an e-commerce party in China. “We are voluntarily disclosing this SEC information request and are cooperating with the SEC,” he said on the file.

The e-commerce company added that the investigation did not indicate that there had been a violation of securities laws. “This matter is ongoing and, as with any regulatory process, we cannot predict when it will be concluded,” the file said.

Shares of Alibaba Group Holding Ltd were trading down 3.66% at 10:25 a.m. EDT. In the past 12 months, the stock has fallen 16.53%.

The SEC is expected to focus on concerns raised last year by certain short sellers and research firm Pacific Square Research. The research firm raised the question of whether the e-commerce giant should consolidate its logistics subsidiary, Cainiao Smart Logistics Network, The New York Times reported.

Alibaba, which owns a 47% stake in Cainiao, said in the filing that it provided the commission with information about its accounting for Cainiao.

Last week, the Hong Kong Securities & Futures Commission (SFC) announced that e-commerce broke takeover rules in its acquisition of CITIC 21CN Company Ltd. The e-commerce company agreed to pay $ 170 million to acquire a stake in CITIC 21CN in 2014. At the same time, the company signed another agreement with a shareholder of CITIC 21CN, namely Mr. Chen Wen Xin, to buy his own Hebei Huiyan medical technology. This was a violation of takeover rules, according to Hong Kong regulators.

Alibaba Cloud Computing Company

Alibaba Cloud was China’s largest public cloud service provider in 2015 by revenue, according to IDC. The company launched its Cloud business in 2009. It offers elastic computing, database, content storage and delivery (CDN), large-scale computing, security and management, and application services.

As of March 31, 2016, Alibaba Cloud had more than 2.3 million customers, including more than 500,000 paying customers. Its clients include China Railway, Weibo, and Beijing Genomics Institute.

Alibaba said its products are different from its domestic players due to proprietary security and middleware products, large-scale IT services, and analytics capabilities.

“Our cloud computing platform has supported our annual Singles Day promotion when record traffic and transactions occur. On Singles Day in 2015, Alibaba Cloud successfully processed peak transactions of 140,000 orders per second, ”the company said on the record.

Earlier this year, Alibaba Group Holding Ltd announced a Billion dollar cloud partnership with Nvidia Corporation to collaborate in the development of artificial intelligence and cloud computing technologies. The companies plan to hire around 1,000 developers to build a big data platform over the next three years.

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