BABA Stock Alert: Will the SEC Delist Alibaba?


  • Shares of China’s flagship technology firm Alibaba (BABA) are down 10% in afternoon trading.
  • U.S. regulators are pushing for uncompromising access to auditing papers of Chinese companies listed in New York.
  • BABA stock is also fading amid news that founder Jack Ma is planning to cede control of Alibaba affiliate Ant Group.
BABA stock - BABA Stock Alert: Will the SEC Delist Alibaba?

Source: zhu difeng /

Beleaguered technology firm Alibaba (NYSE:BABA) — essentially China’s flagship corporation and emblematic of the world’s second-largest economy’s meteoric ascendency — finds itself under extraordinary pressure. Primarily, the Securities and Exchange Commission (SEC) may delist BABA stock should the Chinese government continue to resist financial transparency efforts. The news comes amid a recent development that Alibaba founder Jack Ma plans to cede control of affiliate company Ant Group.

First, Reuters reported earlier this week that the Public Company Accounting Oversight Board (or PCAOB), a federal regulatory agency which oversees audits of U.S.-listed companies, demanded that it receive unfettered access to the audit papers of Chinese public companies that are listed in New York. If the issue is unresolved, more than 270 Chinese companies could get delisted, thus boding poorly for BABA stock.

According to a Financial Times report, Beijing is preparing to categorize U.S.-listed Chinese firms into groups based on a data sensitivity spectrum, presenting a potential concession to U.S. rules. While the China Securities Regulatory Commission (CSRC) denied such plans, PCAOB spokesman Kent Bonham stated that it “must have complete access to audit work papers of any firm it chooses to inspect or investigate — no loopholes and no exceptions.”

Ironically, this development juxtaposes against China’s own regulatory demands toward BABA stock and its peers. Recently, the Wall Street Journal reported that Alibaba founder Jack Ma plans to relinquish control of affiliate firm Ant Group, which specializes in financial technology (or fintech) platforms. As well, other Ant Group executives have stepped down as Alibaba partners amid heightened scrutiny from Beijing.

Delisting Risks for BABA Stock Rise Amid Heightened Tensions

Against the backdrop of a boardroom scramble, investors clearly got nervous about Alibaba’s forward stability. In the late afternoon session, BABA stock slipped around 10%. Over the trailing month, shares have given up approximately 22% of market value. However, the delisting threat shines arguably the most glaring spotlight on the tech giant.

SEC chair Gary Gensler stated this month that he was “not particularly confident” that a deal could be reached between the U.S. and China regarding accounting transparency. The SEC oversees the PCAOB, with the latter seeking complete access versus varying degrees of access.

Reuters noted that the oversight spat has been simmering for more than a decade. However, the situation “came to a head in December when the SEC finalized rules to delist Chinese companies under the Holding Foreign Companies Accountable Act. It said there were 273 companies at risk.”

Adding fuel to the fire, Chinese leader Xi Jinping warned President Joe Biden about how a possible visit by U.S. House Speaker Nancy Pelosi to Taiwan could inflame already simmering tensions. “Those who play with fire will perish by it,” China’s foreign ministry quoted Xi as telling Biden in a call. “It is hoped that the U.S. will be clear-eyed about this.”

With no love lost between the two nations, BABA stock stands at an awkward juncture.

Economic Woes Don’t Help

As if stakeholders of BABA stock needed even more problems to consider, economic woes present significant headwinds in and of themselves. What’s more, Beijing is holding true to two controversial decisions: being relatively conservative about monetary stimulus efforts and reiterating its zero-Covid-19 policy.

Currently, China is wrestling with a property crisis which has led to burgeoning debt loads among developers as well as a mortgage default crisis as angry buyers of unfinished housing projects banded together to refuse payments. In addition, pandemic-related disruptions forced certain localities to slash government worker salaries.

In other words, even without the delisting overhang, BABA stock appears to be facing a world of hurt.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Article printed from InvestorPlace Media,

©2024 InvestorPlace Media, LLC