Alibaba’s accounting methods are under investigation in the U.S. The Chinese e-commerce giant, which went public in 2014 in the largest NYSE IPO in history, quietly disclosed that the SEC is looking into whether it has violated federal securities laws.
The probe focus is centered around Alibaba’s relationship with its affiliate organizations, its business on Singles Day — China’s largest online shopping day in which Alibaba grossed $14.3 billion in sales last year — and other general investments. Alibaba has spent more than $40 billion on M&A over the past five years, including recent billion-dollar deals with food delivery firm Ele.me, Southeast Asia’s Lazada and video site Youku Tudou, so there’s plenty to pore over.
“The SEC has requested that we voluntarily provide it with documents and information relating to, among other things: our consolidation policies and practices (including our accounting for Cainiao Network as an equity method investee), our policies and practices applicable to related party transactions in general, and our reporting of operating data from Singles Day,” Alibaba wrote in a filing.
The company said the SEC cautioned that the probe shouldn’t be interpreted as a sign that Alibaba has actually broken laws. It added that it has complied with the requests, which were made “earlier this year.”
The Chinese firm has a number of affiliate companies, including Ant Financial — which controls its Alipay service — and Cainiao, which is focused on logistics and recently raised its first external funding at a reported valuation of $7.7 billion.
Cainiao was founded three years ago with partners from the logistics industry. Alibaba holds a 48 percent share in the business, but its exact role and financial involvement in the organization is unclear, as The New York Times pointed out last year.