Possible accounting irregularities have driven a Chinese film production company owned by Alibaba Group to suspend trading of its stock. The revelations came as Alibaba is gearing up for its IPO in the United States.
A media company recently bought by the Chinese e-commerce giant Alibaba revealed Friday that it had come across possible accounting irregularities in its books and had suspended trading of its stock.
Alibaba Pictures Group, once known as ChinaVision Media Group, said the potential inconsistencies may have happened before Alibaba Group bought a 60 percent stake in the company for $804 million (600 million euros).
The timing is important because Alibaba Group is gearing up for an initial public offering (IPO) in the US that analysts say could surpass the $16 billion raised by Facebook when it went public in 2012.
If the irregularities are confirmed, it could foment doubt about Alibaba Group's due diligence leading up to the listing. It could also provide fodder to those who believe the tech behemoth has been too hasty in purchasing a number of companies recently.
Since the beginning of last year, Alibaba has spent $10 billion on acquisitions alone to diversify its holdings beyond the e-commerce business.
In June, for instance, Alibaba bought a leading Chinese soccer club, the Guangzhou Evergrande, for $192 million.
In a filing to the Hong Kong stock exchange, Alibaba Pictures said it had asked for trading in its shares to be suspended while internal auditors look into the possible “non-compliant treatment of financial information.”
Alibaba Group said in a statement that it supported the review of its media subsidiary's finances, lauding managers there for their “commitment to transparency.”
cjc/uhe (Reuters, AFP)