Alibaba shares recover after diving 9% on SEC probe news

Shares of Alibaba Group Holdings recovered Thursday after plunging almost 9% on Wednesday to trade below two critical technical support areas.

Alibaba founder and chairman Jack Ma

Alibaba founder and chairman Jack Ma

On Wednesday, the Chinese e-commerce company disclosed it is being investigated by the US Securities and Exchange Commission to determine whether its accounting practices violated federal laws.

Shares bounced off a session low of $74.12 to close Wednesday’s session in New York down 6.8% at $75.59. Midday Thursday, the stock was up 3.4% to $78.19, but still below Tuesday’s close of $81.12.

As of last week, Alibaba shares were down 7% for the year.

According to TheStreet.com, Alibaba’s stock has fallen below both the 20-day and 50-day moving averages of around $78 per share.  Technical analysts at TheStreet said the stock could fall as low as $73, its 100-day average. They said this means the stock now has a greater chance of falling to $70, or 7% lower, than retesting resistance at around $81, or 7% higher.
Alibaba said that it was cooperating with the authorities, and that the SEC advised it the investigation should not be seen as an indication the company had violated federal securities laws.

The investigation is focused on the accounting for logistics firm Cainiao Network. Alibaba holds a 47% stake in Cainiao. It’s also investigating accounting practices applicable to related-party transactions in general, and data from its annual “Singles’ Day” sale, according to the annual report Alibaba filed on Tuesday.

Reuters reports that merchants in China have questioned whether results from the Nov. 11 Singles’ Day promotion, which have exceeded the combined sales of the Black Friday and Cyber Monday shopping events in the US, are as high as reported by Alibaba. Last year it reported about $14 billion in transactions on Singles’ Day.



Categories: Asia Unhedged, China

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