Alibaba stock sinks on ‘Singles Day’ probe,
E-commerce giant’s other accounting practices also targeted
The U.S. Securities and Exchange Commission is probing Chinese e-commerce giant Alibaba’s annual blockbuster sales day.
Alibaba said in a public filing late Tuesday the SEC is investigating “our reporting of operating data from Singles Day” — a one- day sales extravaganza that generated more than $14 billion in revenue Nov. 11.
“Earlier this year, the SEC informed us that it was initiating an investigation into whether there have been any violations of the federal securities laws,” Alibaba said. The SEC declined to comment.
The giant online retailer is cooperating with the SEC and providing it all requested materials but noted “the SEC advised us that the initiation of a request for information should not be construed as an indication by the SEC or its staff that any violation of the federal securities laws has occurred,” it said in a statement.
The SEC is also probing accounting related to Alibaba’s investment in logistics firm Cainiao Network as well as “our policies and practices applicable to related party transactions in general.”
Alibaba shares closed down nearly 7% to $75.59 Wednesday.
Alibaba has faced scrutiny in the past. In January 2015, China’s State Administration for Industry and Commerce issued a report attacking the company for selling counterfeit, substandard or banned items, as well as items that infringed on trademarks. Alibaba founder Jack Ma met with regulators, and the report was retracted.
In September 2015, Barron’s published a report questioning Alibaba’s reported financials and operating metrics. Alibaba disputed the charges.
Investor Jim Chanos — who has a short position on Alibaba shares, indicating he stands to gain if they fall — at a hedge fund conference this month called Ali- baba’s accounting “some of the most questionable I’ve ever seen,” according to Fortune. In particular, he has criticized Alibaba’s use of off-balance sheet entities.
Alibaba acknowledged problems with the sale of counterfeits on its site and with “brushing,” which it attributed to independent sellers who sold phantom goods to raise their rankings on the site, as sellers with more sales are more highly ranked.
“We take very strong steps to eliminate counterfeits and stop brushing. ... I would challenge anyone to find any company that does as much as we do,” spokesman Robert Christie said.