Embarrassing discovery raises questions over quality of e-commerce giant’s acquisitions in the run-up to its IPO.
Chinese e-commerce giant Alibaba Group asked for trading in its 60%-owned film-production subsidiary, Alibaba Pictures, to be suspended, and delayed the publication of its half-year results after discovering what it called “possible accounting irregularities” at the unit.
The announcement is an embarrassment for the group as it prepares for its multi-billion initial public offering in New York, tentatively scheduled for September, casting doubt over the quality of its rapid-fire acquisitions over the last year.
Alibaba had paid $800 million for a controlling stake in what was then called ChinaVision Media Group less than six months ago, as part of a strategy to develop its own media content business. In a filing to the Hong Kong Stock Exchange Friday, it said the possible irregularities had been discovered by the new management team that it had installed since taking control.
It suggested that the company’s old management had hidden problems at the business, saying that the new team “is of the preliminary view that insufficient provision for impairments of certain assets for the six months ended 30 June 2014 is likely to have been made.”
That admission may raise questions about how thorough it was in a flurry of deal-making this year.
“The new Board and management team are instituting changes to the Company’s policies and procedures that reflect a strong commitment to transparency, good corporate governance and investor protection,” the company said.
Alibaba said it had launched an inquiry into the issue, but would probably not be able to publish its half-year results for Alibaba Pictures until after the end of August, the deadline for pubslhing half-year accounts at the HKSE, meaning that the final results of the probe at the film unit may overlap with the marketing of the group’s IPO.