Alibaba´s shares fell when it disclosed the US stock regulator has asked some questions about its accounting practices, especially the relations with its logistical partner Cainiao Network. But, says accounting professor Paul Gillis to Bloomberg, there is no reason to expect real problems.
Alibaba fell 6.8 percent to $75.59 in U.S. trading, the biggest drop since January. It was down less than 1 percent this year through Tuesday. The stock fell 22 percent last year, hurt by a slowdown in China’s economy, where it accounts for more than three-quarters of the nation’s online retail sales. The probe appears to be aimed at improving transparency for key parts of the business, said Paul Gillis, an accounting professor at Peking University’s Guanghua School of Management.
“We don’t have enough details to know how serious this is at this point,” said Gillis.
Alibaba owns a 47 percent stake in Cainiao, which counts Temasek Holdings Pte, GIC Pte and Khazanah Nasional Bhd as investors. The company doesn’t directly own physical infrastructure including property, trucks or delivery personnel. Instead it provides a centralized information system to support courier companies.
Because of its ownership level, Alibaba reports only its percentage of the losses at Cainiao. The U.S. regulator may be asking whether Cainiao should be consolidated completely, according to Gillis. While that would mean that Alibaba would have to include 100 percent of the losses from the business, it wouldn’t be a big deal, he said.
“That wouldn’t have a huge affect on the financial statements,” Gillis said.
Are you interested in the technical background of the comments by Paul Gillis? Check out his weblog here.
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Earlier this year we discussed with William Bao Bean how competitor Tencent is organizing its company.