The Strategist

US regulators are investigating Alibaba's record sales in the Single's Day

05/26/2016 - 15:56

U.S. Securities and Exchange Commission is investigating accounting practices in the Alibaba Group in order to find out possible violations of US securities legislation by the Chinese Internet giant. This is stated in Alibaba’s message posted on SEC’s website.

leighklotz via flickr
leighklotz via flickr
SEC has launched an investigation earlier in 2016. The regulator has asked the Chinese company to voluntarily provide documents and information on the consolidation policy, transactions with related parties as a whole, and reports on operational data in the Single’s Day (Chinese large-scale sale).

Single’s Day was held on 11 November. Its turnover exceeded total sales for Black Friday and Cyber Monday in the US. Alibaba announced that turnover of the great sale numbered about $ 14.4 billion in 2015. According to Reuters, some vendors, who sell through the website. have also received questions about whether the results of sales in the Singles Day are as great as Alibaba reported.

One of SEC’s concern is that Alibaba cannot use generally accepted accounting principles, so it figures may not be comparable with other companies, said business school professor at Peking University Paul Gillis to The Wall Street Journal. "The problem in the figures of the trading platforms’ gross turnover is that there are no two companies that have calculated these figures the same way," - he argues.

In addition, the controller is interested in accounting data of Cainiao Network logistic company, 47% of which is owned by Alibaba. The latter founded Cainiao Network in conjunction with Yintai Holdings, Fosun Group, Forchn Holdings and five major logistics companies in 2013.  

Earlier, it reminds Reuters, Alibaba did not show results of Cainiao in its financial statements, which eventually raised questions among some investors and analysts. "We just do not understand whether the [Cainiao] business is profitable, or not," - Jim Chanos of Kynikos Associates LP complained to CNBC.

Alibaba Cainiao’s revenue, its net loss ($ 13.7 million), the value of assets and liabilities were disclosed for the first time in Alibaba’s latest annual report. Earlier in May, Chief Financial Officer Maggie Wu said that Alibaba wants to make its business more transparent and start to give investors the annual revenue forecast. 

According to Alibaba Group, the company provided SEC with all requested information, and is cooperating with the Commission now. Previously, Alibaba also attracted SEC’s attention after accusations of selling fakes on the Chinese marketplace.

Investors are worried about the future of the Chinese Internet giant amid slowing Chinese economy, notes the WSJ. Alibaba's shares jumped 38% on the first day of trading after its $ 25 billion IPO in 2014, but then fell even below the offering price.


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