Investors are concerned about Alibaba's shares being delisted from the New York Stock Exchange. If BABA gets delisted from the New York Stock Exchange, here's what you need to know.
Get BABA (BABA) - Alibaba (BABA) - Alibaba (BABA) - After a period of extreme fluctuation in its share price, Alibaba Group Holding Ltd. Report is back in the limelight. After Alibaba's management announced a growth turnaround strategy during its recent "Investor Day," the stock recently soared higher.
However, shares of companies such as (BABA) - Get Alibaba Group Holding Ltd. Report, Nio (NIO) - Get NIO Inc. (China) Report, JD.com (JD) - Get JD.com Inc. Report, and Baidu (BIDU) - Get Baidu Inc. Report have plummeted since Beijing's latest regulatory clampdowns pushed Chinese stocks to the point of delisting from US markets.
This is what you need to know if Alibaba — or any other Chinese business — delists from US stock markets.
The Delisting Scenario
Beijing has altered its tune after years of allowing Chinese businesses to float on American stock markets.
The US Securities and Exchange Commission's mandate that listed firms exchange data with the agency and allow it to undertake audits of their businesses is particularly concerning to Chinese officials.
Didi (DIDI) - Get DiDi Global Inc. Report, one of the large Chinese firms that went public on the New York Stock Exchange in 2021, sought to delist from the NYSE barely six months after its IPO (IPO). The major reason for this was Chinese officials' displeasure with DIDI's listing in the United States without a clear response to cybersecurity issues and data leakage.
Other major Chinese internet businesses, such as Alibaba, JD.com, and Baidu, who have previously completed dual listings on the Hong Kong stock exchange, may face the same fate.
It's important to note that this circumstance isn't new. For decades, China and the United States have had a severe regulatory battle. However, no progress has been achieved in calming both sides' tempers.
What Happens If a Stock Is Delisted?
When a stock is delisted, it is no longer listed on the stock exchange. Alibaba, for example, would not be listed on the New York Stock Exchange (NYSE).
The stock might still be traded over-the-counter (OTC), which implies on a decentralized market.
Institutional investors, on the other hand, tend to quit a stock when it delists. It also loses access to a large number of customers, sellers, and middlemen. This might lead to a decrease in liquidity and a decline in the company's stock price.
Beijing's delisting pressure is not just a significant danger for these firms, but it is also a huge risk for the Chinese economy as a whole.
A decrease in capital inflow will most certainly hurt China's economy. Closing the borders to foreign finance is almost never a good idea. It would give the impression that Chinese businesses may not be worth investing in.