To The Moon

BEIJING, July 29  (TMTPOST)— American depositary receipts (ADRs) of Alibaba fell 11% Friday as the Chinese e-commerce giant was facing more risks of delisting from the U.S. exchanges.

Source: Visual China

The U.S. Securities and Exchange Commission (SEC) has added four Chinese companies including Alibaba, the most valuable U.S-listed Chinese firm, to a provisional list on Friday, for failing to comply with the Holding Foreign Companies Accountable Act (HFCAA), The law allows SEC to prohibit companies from trading and make listed companies be kicked out of U.S. exchanges if the Public Company Accounting Oversight Board (PCAOB), SEC’s accounting body, is unable to inspect or investigate these company audits for three consecutive years.

SEC first identified Chinese listed firms as the issuers in the list under HFCAA on March 8. Since then, it has so far placed more than 150 Chinese listed companies to the delisting watchlist, accounting for almost 60% of the Chinese companies listed in the United State. JD.com, Pinduoduo and Vipshop, Alibaba’s peers in e-commerce sector, had already faced the same delisting risk in May.

Prior to SEC’s recent move, Alibaba earlier this week announced to apply for a primary listing in Hong Kong, as part of efforts to mitigate regulatory risks both in U.S. and China. Once the primary listing process completes, Alibaba will become a dual primary listed company on the stock exchanges of Hong Kong and New York, allowing its shares continue to be traded even if it fails to avoid of being delisted from the U.S. stock market.

Alibaba CEO Daniel Zhang said the decision to add Hong Kong as another primary listing venue was made to foster a wider and more diversified investor base to share in Alibaba’s growth and future, especially from China and other markets in Asia. “Hong Kong and New York are both major global financial centers, with shared characteristics of openness and diversity,” Zhang note. “Hong Kong is also the launch pad for Alibaba’s globalization strategy, and we are fully confident in China’s economy and future.”