Alibaba Group, the Chinese e-commerce leader whose upcoming U.S. IPO is likely to be one of the world’s largest ever, has hit an accounting speed bump ahead of its expected New York listing.
A Hong Kong-listed film production company that Alibaba Group spent $804 million for a 60% stake in earlier this year as part of a push into the entertainment industry on Friday disclosed the discovery of “certain possibly non-compliant treatment of financial information in the (c)ompany’s accounting records” covering periods before Alibaba Group’s investment.
Alibaba Pictures Group, whose current directors include actor Jet Li, said it wasn’t in a position to comment on the potential impact on the company’s financial figures and that it is uncertain how long a newly launched inquiry will take. Trade in Alibaba Pictures Group shares was halted.
Alibaba Group earlier this year bought 60% of ChinaVision Media, renamed it Alibaba Pictures Group, and also moved to acquire a stake in U.S.-listed online video site Youku as a means to boost its online content business. It also said last month it would team up with Lions Gate, whose U.S. hits include the Hunger Games series and Orange is the New Black, to offer film and TV content on a streaming service on China.
Alibaba Group, which is 24% owned by
The awkwardly timed disclosure by Alibaba Pictures will remind investors of China’s often less-than-robust corporate governance standards, raise questions about the extent of due diligence conducted at other businesses that Alibaba Group has invested in of late, and possibly rekindle questions about Alibaba Group’s ties with businesses backed by billionaire chairman Jack Ma. With global investors bidding up China Internet shares so much this year, however, it seems unlikely to threaten Alibaba Group’s big IPO itself.
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