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Alibaba: SEC Makes A Move

Business Quant profile picture
Business Quant


  • US and Chinese regulators have finally struck an agreement that allows for the audit inspections of Chinese stocks.
  • But even with the agreement in place, the delisting risk still persists for Alibaba and other such impacted firms.
  • Risk-averse investors may want to avoid the stock for the time being.

Yahoo Takes 40 pct Stake in China"s Alibaba

Guang Niu

There's been a lot of furor surrounding Alibaba (NYSE:BABA) of late. Chinese and US regulators have finally reached an agreement last week under which the former will allow the latter to conduct unfettered audit inspections of

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Business Quant profile picture
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Comments (53)

TheFounder profile picture
The fear of delisting is highly exaggerated. Delisting is not a bankruptcy.

The HK market has thousands of traded companies, more than 100 years of tradition and an aggregate market cap of USD trillions.

BABA will flurish there.
@TheFounder to me delisting to a communist country would mean game over you lost everything. I think delisting fear is justified no one wants their money disappear in a dictator lead country. Imagine investing in North Korea stock exchange lol do they have one ? Then someone says don’t worry about delisting you be ok.
TheFounder profile picture
So there are over 2500 companies currently traded in HK which did not "disappear in a dictator lead company" as you suggest. Not 1, not 15, but 2500+. This is one of the major markets in the world so no need to spread baseless fear. Millions of investors are making money there.
John_III_XVI profile picture
@TheFounder Forced delisting from NYSE would result in an even lower bottom from panic induced sell off. And a loss of access to general American investors who do not shop foreign exchanges for investments.

If HKEX was such a good deal, I am sure Alibaba would have paid for a HKEX primary listing instead of the cheaper secondary listing they have now. When your interest is money then you choose #1, not #4.

I expect Alibaba to pass their audit in the next 4 to 6 weeks & keep their NYSE listing. And continue seeking a primary listing on HKEX. Should be business as usual after that for the Cayman Island VIE stock "BABA".

Of course global recession, war sanctions, energy crisis, Chinese & American economic slow downs, Chinese COVID lock downs & their real-estate mess will be huge headwinds to growth.

Tough climate for day trading. Caveat emptor. ;>) God bless.
Chairman Xi and his clan is from Snaghai. Politburo de facto took complete control of all vital conglomerates, CCP deems of vital importance to China's security and military complex.
Finally a reasonable Article and rating of Hold is correct. The final verdict of this year compliance on accounting audits thumbs up or down won’t be known till December until then great uncertainty looms over Chinese stocks. Any SA Author issuing Strong Buy is misleading readers into unknown risk for which they have no idea what they are talking about. At this point a Strong Buy on any Chinese company which could be delisted is equivalent to saying “we don’t know what will happen so risk/reward is high like Bitcoin so therefore Strong Buy”.
Business Quant profile picture
Thank you for the kind words, @sbwiad33 .
EliasMouawad profile picture
BABA is ready to jump higher but the general market isn't helping
Shaduc profile picture
@EliasMouawad china lockdowns are devistating that economy
Business Quant profile picture
Out of curiosity, @EliasMouawad , which data points suggest BABA is ready to rally?

EliasMouawad profile picture
@Business Quant In addition to the audit agreement, more Chinese stimulus...strong support above $89 while the 200 day moving average is falling day after day.
Seams to me, that it is entirely possible that one or some Chinese listed stocks financials are not GAP compliant. Ok, but does anyone really believe that most or all of them are engaging in systematic fraud. Surely fraud of that wide scale would be found out over time. Muddy waters et all would have found that out already. I’m not expecting a big fraud problem.
Shaduc profile picture
@mac ron there are 2 global acctg standards eu or usa.
this is the fault of the SEC for not doing its job.
but they were competing with hk for ipos.
Business Quant profile picture
Completely agreed with you, @Shaduc , this should've been done more than a decade ago.

Shaduc profile picture
@Business Quant when I "studied" this 2006-7, I assumed the SEC, Wall Street Regulators were already doing this.
Instead they they were greedy for IPOs
not sure how many comparisons to Didi there are, but definitely Luckin Coffee fraud
Another cheap Commie trick. They engage in uncontrolled laughter when
agreements are reached with us Western dopes. They make monkeys out
of us daily, as we continue to believe that they are sincere. Not good.
TheFounder profile picture
The delisting risk makes the stock uninvestable by many US institutions.

So we get a valuation which reflects the risk of bankruptcy or restructuring, only without the actual bankruptcy or restructuring risk.

Whichever the outcome will be at the end, the uncertainty will go away and it will still be a growing and profitable global company which spends billions on share buyback programs.

This is called a market dislocation.

Upside: $180-250/share and trade on a US exchange
Downside: 20% less and and trade in HK.
Business Quant profile picture
Okay, fair point, @TheFounder , but are you factoring in that BABA's growth itself has slowed down considerably due to macroeconomic reasons, lockdowns, regulatory crackdowns and because it no longer can function as a monopoly (thanks to the antitrust fine)?
cue the commentors about how the CCP takes an iron fist to Baba and cannot be trusted while simultaneously ignoring what the US Gov just did to NVDA and it's revenue streams in foreign countries....
Buying hard and buying fast and going long. Incredible sale and opportunity get in at this price. "Be greedy when others are fearful" WB
Chinese are smart, intelligent and hard working people but under the stupid management of Mr. Xi who is killing all the golden geese companies with his zero covid policy tool.
@Finance Tiger
Mr. Xi is on top because he was smarter, more intelligent and working harder than most of the smart, intelligent and hard working Chinese. I would also not neglect 1.5 M Covid deaths in God’s Own Country, but bashing from the sofa is fun, right?
davel profile picture
@Duffy Duck

Because political leaders are always smarter, more intelligent and harder working than others..
Not sure about that, but it is not my point anyway. I feel uncomfortable that people - often with below average IQs -have many platforms to spit out their momentary frustrations without the need to think about it beforehand.
Greenhorn Investor profile picture
Thank you for the article
Godspeed Trader profile picture
@Greenhorn Investor best attitude you can find on SA
John_III_XVI profile picture
This is a very long-winded way of saying the agreement has opened the door to inspections BUT the inspection results must be positive to have FUTURE positive results. Duhhhhhhhh...

I have been a skeptic but my biggest roadblock was the lack of access for USA inspectors. Huge roadblock removed. I think the rest of the process will work itself out. And, in short, time will tell. ;>) The risk from the CCP using their companies like cookie jars still exists as is China's own economic woes.

I don't expect BABA to get much cheaper. For anyone who has been waiting for a buy signal it might be the right level & time to start buying. Just remember it is still China in the ironfisted control of the CCP.
@John_III_XVI Buying hard and buying fast and going long. Incredible sale and opportunity load up at this price. "Be greedy when others are fearful" WB
@John_III_XVI Buy signal??? Check with CCP, they are superb chartists.
John_III_XVI profile picture
@grandherve You forgot the "might be" & "still China" warning that followed immediately after. ;>)
I love to gamble. Long BABA and long PDD.
Shaduc profile picture
@Z Dougie Dub baba and pdd aren't gambles. Just when they pay off is questionable.

I bought $20k options
fredex profile picture
@Shaduc What timeframe of options are you looking at?
Shaduc profile picture
@fredex over 1 year. lost $8k
Djreef1966 profile picture
The reason I now hold the 9988.HK shares.
@Djreef1966 the percentage price change will be the same whether it is 9988.HK or BABA.

What you have done by changing to 9988.HK is in the worst case of delisting is got around the rush that would ensue to transfer from BABA to 9988.HK, also you can trade 9988.HK local time rather than BABA in its local time. I say rush because if it was told it had to delist this usually occurs in a reasonably short time period.
Djreef1966 profile picture
@ajmacknz It wasn’t last night.

…And it won’t be if BABA is delisted.

The entire process took 2 weeks.
@Djreef1966 are you comparing closing prices in NY vs HK, otherwise the prices will move in parallel. The conversion is:

BABA price = 9988.HK price x 8 / (HKD / USD, about 7.8 at the moment)

If for instance a delisting announcement was made after the close of business NY time then after hours BABA price would drop, but opening 9988.HK price would also have dropped.

Thanks I have been considering changing to 9988.HK too but as I understand it they have till something like 2024 to have the audit done and with recent announcements it seems like China and the US may be moving toward an agreement.
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