Alibaba Group Holding Ltd. (NYSE: BABA) disclosed the U.S. Securities and Exchange Commission in investing its accounting practices, which includes the its Cainiao logistic network, operating data for “Single Day” that the largest online shopping day of the year in China, and other “related party transactions in general”, according to a regulatory filing. "We are voluntarily disclosing this SEC request for information and cooperating with the SEC and, through our legal counsel, have been providing the SEC with requested documents and information," the Alibaba statement said.
Alibaba reported their sales in Single’s Day more than $14 billon just on that single day in 2015, which raised some analysts and investors questioned that transparency of Alibaba’s financial statements. Single’s Day, normally on 11th November, is the biggest shopping event for Chinese online shopping, which sales accounts for more than the total sales of Black Friday and Cyber Monday shopping events around U.S. Alibaba said it had provided the commission with information about how it reported data from that event.
From Alibaba’s spokeswoman, she said that a net loss from Alibaba’s Cainiao logistics of of 90 million yuan and 295 million yuan in fiscal years 2015 and 2016, respectively, which totally counted about $60 million during the last two years. The filing said the logistics service costs paid to Cainiao accounted for approximately 60% of its revenue for 2015. In last year’s annual filing, Alibaba didn’t disclose costs paid to Cainiao. That “is exactly the kind of robust and transparent information that will address the underlying issues in the S.E.C.’s inquiry,” she said.
The stock price of Alibaba dropped about 4% to $77.76 at noon Wednesday in New York trading. Investors are also worried about the Alibaba’s further giant growth prospects regarding to recent China’s slowing economic growth.
Alibaba Group Holding Ltd. is China’s biggest e-commerce company, which raised $25 billion in the world’s largest initial public offering in 2014, while their stock price fell below its $68 IPO price. It is still unclear whether this SEC investigation will affect Alibaba, but this disclosure may risk tarnishing Alibaba’s global reputation, regarding to Alibaba’s executive chairman, Jack Ma, just attended a private lunch with President Obama at the White House last week.
According to Alibaba’s Chief Financial Officer Maggie Wu on the most recent earnings call, they will further corporate with SEC and provide greater transparency on its business by introducing annual revenue guidance and releasing new business cost structures and margins.