US probes e-commerce giant Alibaba's accounting practices
WASHINGTON (AP) - Chinese e-commerce giant Alibaba says U.S. regulators are investigating its accounting practices.
The company is the world's biggest e-commerce platform, with more than 420 million people buying $485 billion worth of goods last year on its sites. Its digital platforms, including Taobao and Tmall, make up 80 percent of Chinese e-commerce.
Alibaba said in a regulatory filing Tuesday that the U.S. Securities and Exchange Commission has requested documents and information related to the way it adds together earnings from its various divisions and how it reports transactions with other companies it has a stake in, among other things.
The company said it is cooperating with the investigation. Alibaba said it was told by the SEC that the request for information shouldn't be interpreted as an indication by the agency that the company has violated securities laws.
SEC spokesman Kevin Callahan declined to comment Wednesday.
U.S. traded shares in Alibaba were down more than 6 percent in heavy afternoon trading Wednesday.
The disclosure of the SEC probe comes less than two weeks after Alibaba's membership in the International Anti-Counterfeiting Coalition was suspended. Some U.S. retailers that are members of the group, which lobbies U.S. officials and testifies before Congress, view Alibaba as a huge marketplace for fakes. Michael Kors, Gucci America and Tiffany quit the group in protest after Alibaba was made a member in April.
Alibaba Group Holding Ltd. went public in the U.S. in September 2014. Investors, seeking to tap into the rapidly growing Chinese middle-class, scrambled to buy shares. The offering raised $25 billion, making it the largest in the history of the New York Stock Exchange.
Led by self-made billionaire and founder Jack Ma, Alibaba has put a huge footprint on the Chinese economy and made unorthodox moves, such as spinning off its payment service into a company Ma controlled without telling Yahoo, a major investor in Alibaba.
To get around Chinese government restrictions on foreign investment in Internet companies, Alibaba deploys an unusual structure that gives foreign investors a stake in profits but keeps management control in China. That arrangement magnifies risks for investors. Chinese executives can confiscate corporate assets without compensating shareholders. And investors might have no grounds to sue.
Alibaba's e-commerce platforms cater to both Chinese and global consumers. At its heart is Taobao, a Chinese consumer-to-consumer website similar to eBay. Tmall offers merchants official storefronts to consumers in China.
As sales growth has slowed in China with a weakening economy, Alibaba has reached abroad to spur sales, both from U.S. companies selling goods on its platforms in China and Chinese sellers catering to international customers.
U.S. investors, worried about the state of the Chinese economy, have been wary of any possible signs of weakness in Alibaba's performance. The company in January reported better-than-expected results for its third quarter, as mobile shopping continued to grow and Chinese customers snapped up goods during the holidays.
Alibaba said the SEC's request also included information on accounting for its Cainiao Network and its reporting of operating data from Singles Day, the popular Chinese shopping holiday on Nov. 11.