Last week, Chinese e-commerce behemoth Alibaba said in a regulatory filing that the US Securities and Exchange Commission had launched a probe into its accounting practices. Though the company has previously said that it was actively cooperating with the US regulator, Alibaba founder and executive chairman Jack Ma said in an interview with the Chinese media (via Reuters) that the US doesn’t fully understand the company’s business model.
SEC just performing its duties
Welcoming the inquiry, Ma told state-run Xinhua that the best way to handle the investigation was transparency and communication. The probe was launched to determine whether Alibaba violated the federal securities laws. Jack Ma said it didn’t necessarily mean that his company has a problem. The SEC is just performing its duties. However, it isn’t clear what prompted the US regulator to launch the probe.
Ma told Xinhua that Alibaba’s business model has no references in the United States. So, it’s not easy for the US to understand its business model. The SEC’s probe focused on accounting for the company’s logistics arm Cainiao Network, and operating data from its annual “Singles Day” sale. The Hangzhou-based company formed Cainiao Network in 2013 in partnership with Yintai Holdings and Fosun Group.
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SoftBank’s proceeds from Alibaba stake sale rise to $10 billion
Cainiao’s financial results have not been part of Alibaba’s financial results in the past. But the e-commerce giant disclosed for the first time in its latest annual report Cainiao’s financial performance, assets, and liabilities. Jack Ma said he did not know when the results of the investigation would arrive. He hopes the SEC will be able to give the company a clear explanation afterwards.
Separately, Alibaba’s largest shareholder SoftBank is selling part of its stake in the company. The Hangzhou-based company repurchased $2 billion worth of its stock from SoftBank, and another $400 million worth of shares were bought by Alibaba Partnership. SoftBank had initially planned to sell only $7.9 billion shares of the Jack Ma-led company. But the proceeds have swelled to $10 billion as the Japanese company exercised an option to sell more shares through a trust. SoftBank will use the proceeds to reduce its massive debt burden.