American regulators are investigating China's e-commerce giant
“WE HAVE from time to time been subject to PRC and foreign government inquiries and investigations.” So declared form 20-F, a regulatory filing submitted by Alibaba, China's biggest e-commerce firm, to America's Securities and Exchange Commission (SEC) on May 24th. It is tempting to dismiss this as boilerplate language. All foreign firms listed in America (Alibaba trades on the New York Stock Exchange) are required to file this document regularly. In fact, it is not inconsequential. The filing revealed that Alibaba is the target of an ongoing SEC investigation into its accounting practices. The company's shares fell sharply after the news became public.
The SEC appears to have three areas of concern. It wants to know more about the Cainiao Network, a logistics joint venture worth $7.7 billion in which Alibaba has a 47% stake. The agency also wants data on “Singles' Day”, an annual marketing promotion that last year apparently generated $14.3 billion in gross merchandise value (GMV) on one day. As GMV is not a recognised term in GAAP, the accounting standard used in America, the SEC may be digging into this claim.