Alibaba shares fell Monday after US regulators added the stock to a growing list of Chinese firms that might be kicked off Wall Street if US auditors can’t inspect their financial statements. Alibaba’s stock plunged 11 percent Friday after the Securities and Exchange Commission put the company on its watchlist.
Investors have worried about Alibaba for years, as the company has been caught up in a sweeping crackdown on China’s booming technology sector. The stock has fallen nearly 70% from its all-time high and continues to struggle amid slowing growth and a weakening economy.
The SEC can revoke the trading privileges of a company that has failed to allow American regulators to examine its financial audits for three straight years. China requires companies traded abroad to hold their audit papers in mainland China, where they cannot be examined by foreign agencies. So far, the SEC has added more than 150 companies to its watch list, including Didi, JD.com (JD), Baidu (BIDU), and Yum China Holdings (YUMC). On Monday, Alibaba said it would monitor market developments and “strive to maintain its listing status on both the NYSE and the Hong Kong Stock Exchange.”
Last week, Alibaba announced that it will seek a primary listing on the Hong Kong stock exchange, in preparation for losing US capital markets access. Currently, Alibaba has a secondary listing on the Hong Kong exchange. Alibaba’s smooth transition could serve as an example to other Chinese ADRs looking to diversify their listing risk and retain access to public equity markets if they are forced to leave the United States.