The US SEC on Friday added Alibaba Group Holding Ltd to a list of Chinese companies that could face delisting from US exchanges, pushing the e-commerce juggernaut’s shares down about 9% in mid-day trading.
Alibaba is one of more than 270 Chinese companies listed in the US that face delisting under the Holding Foreign Companies Accountable Act (HFCAA), designed to compel the SEC commissioner to take action against companies that continue to ignore audit rules set out in the 2002 Sarbanes-Oxley Act.
Following Sarbanes-Oxley, all non-US companies listed in the US either took steps to comply with the new rules or voluntarily left. Chinese companies did neither, compelling US Congress to pass a law that requires the SEC to delist non-compliant companies after nearly two decades of Chinese companies’ flouting the rules.
The prior rule said the SEC could take action, but it never did. The new law requires the SEC to delist.
Other big names already on the list include KFC operator Yum China Holdings, biotech firm BeiGene Ltd, Weibo Corp and JD.Com.
On Wednesday, the SEC Chair Gary Gensler said he would not send public accounting inspectors to China or Hong Kong unless there is an agreement on complete audit access.
Gensler stated the Public Company Accounting Oversight Board, which was created as part of Sarbanes-Oxley to oversees audits of US-listed companies, would need to be able to bring “specificity and accountability” in audits.
Alibaba has until August 19 to submit evidence disputing identification, the SEC said.
Others added to the list on Friday include Mogu Inc, Boqii Holding Limited, Cheetah Mobile Inc and Highway Holdings Limited.