Alibaba’s Business Model Difficult for U.S. Regulators to Understand: Jack Ma


Jack Ma, the Executive Chairman of Alibaba Group Holding Ltd (NYSE:BABA) said the company’s business model is difficult for regulators in the United States to understand, during an interview with a Chinese media on Thursday.

Last month, the Chinese e-commerce giant disclosed that the U.S. Securities and Exchange Commission (SEC) is investigating its accounting practices to determine to determine whether the company violated federal laws.

The regulator’s investigation is focused on Alibaba’s consolidation policies and accounting for Cainiao Network as an equity method investee. It is also looking into the company’s third-party transactions and operating data reporting from Single Day, which is considered the world’s largest shopping festival.

SEC investigation doesn’t mean Alibaba has problems

During an interview with Securities Times, Ma said the SEC is just doing its job and the investigation doesn’t mean Alibaba has problems.

Ma explained, “Alibaba’s business model does not have any references” in the United States and he indicated that it would take longer for the SEC to understand its business model.  “It’s not just a matter of one or two days,” he said.

Ma added the he has no idea as to when the SEC will complete and release the results of its investigation. According to him, “We want to thank the SEC for giving us an opportunity to interact.”

He is hoping the regulator will be able to provide Alibaba with a clear explanation after the investigation, and to establish a better system of communications.

Many other Chinese companies that are listed in the United States previously stated that investors and regulators do not understand their business models.

Many U.S.-listed Chinese companies have said that foreign regulators and investors do not understand their businesses.

Short-sellers expect Alibaba shares to go down further

Short-sellers are expecting Alibaba shares to go down further after the Chinese e-commerce giant revealed the investigation.

Bronte Capital’s CIO John Hempton recently stated that Alibaba is a “real company with questionable accounts.”  He added that it is tricky to value the company from its accounts. He expected the company’s stock to “go down a lot and get a takeover bid.”

The shares of Alibaba are trading $76.02 each, down by 1.64% around 2:17 in the afternoon in New York. The Chinese e-commerce giant lost more than 6% of stock value year-to-date.