SEC investigation causes Alibaba share value drop


26 May AtoZForex, Vilnius — A near 7 percent drop was recorded in Alibaba’s share value on Wednesday. An accounting practices investigation by the SEC, eventually caused an Alibaba share value drop. Marking, an undesirable outcome for the Chinese e-commerce giant.

Based on the annual Alibaba report, the company has disclosed accounting information for its logistics unit Cainiao Network to the SEC as well as data of operations for the Singles’ Day shopping festival. In fact, the largest online shopping day in China where Alibaba grossed a whopping 14.3 billion dollars.

Will Alibaba give in to SEC’s inquiry?

“The SEC has requested that we voluntarily provide it with documents and information relating to, among other things: our consolidation policies and practices (including our accounting for Cainiao Network as an equity method investee), our policies and practices applicable to related party transactions in general, and our reporting of operating data from Singles Day,” claimed Alibaba in a filing.

A spokesperson from the company made a statement expressing the company’s intention of expressing the robustness and transparency of the company’s information provision, which it expects will address the SEC’s inquiry.

Analyst’s outlook on Alibaba share valuation

Technology analyst Gil Luria from Wedbush Securities indicated that investors needed to assess the situation carefully. He personally believes it to be a tough call. The contrasting side of the situation at hand is that Alibaba is a firm that has grown by 40% and is trading at 20 times its earnings. That said, he also indicated the underlying factors of inflated volumes as well as factors relating to the competitive situation against JD.com as areas of potential threat assessment.

2016 year to date performance

Alibaba’s shares have risen by more than 13 percent over the preceding three months. Despite the improvements over the period, there has still been an Alibaba share value drop of 7 percent this year to date.

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