China’s e-commerce giant Alibaba [BABA:US] has been put on the US Securities and Exchange Commission’s (SEC) watch list of Chinese businesses that may potentially be delisted from all US exchanges, as reported by Sina Finance on August 1. The news came only days after Alibaba announced on July 26 that it will pursue a primary listing on the Hong Kong Stock Exchange (HKEX), which is anticipated to be completed by the end of 2022, in addition to its US listing. On July 29, the US SEC added four Chinese companies, including Alibaba, Mogu [MOGU:US], Cheetah Mobile [CMCM:US], and Boqii Holding [BQ:US], to the SEC’s watch list of companies that could be delisted for failing to comply with auditing rules. As of today, 159 US-listed Chinese companies have been added to the watch list, including search engine Baidu [BIDU:US] and online video platform Bilibili [BILI:US].
According to the Holding Foreign Companies Accountable Act (HFCAA), the SEC may delist a foreign company if the US Public Company Accounting Oversight Board (PCAOB) cannot fully examine audits of the company’s financial statements. Additionally, the SEC may prevent companies from listing in the US if they had been placed on the watch list for three years in a row. Similar to Alibaba, Zhihu [ZH:US], XPeng [XPEV:US], and other Chinese companies currently listed in the US have also applied for dual primary listings in Hong Kong. Following its inclusion on the watch list, Alibaba stated that it would try to keep its listings in both the US and Kong Kong.