Alibaba Group Holding Ltd (BABA)’s Film Unit Under Legal Scanner For Sloppy Tax Practices

Alibaba Group Holding Ltd (NYSE:BABA)

Alibaba Group Holding Ltd (NYSE:BABA)’s film unit is facing fines related to incorrect tax submissions in August and the company is asked to pay the undue amount with associated interest rates. Alibaba announced plans to purchase stake in the film unit earlier this year.

Alibaba Pictures Group Ltd (HKG:1060), film until of the Chinese ecommerce giant, was found to file incorrect income statement, as found in the independent analysis of PricewaterhouseCoopers. The film unit mentioned the misstated tax submissions in its filing with the Hong Kong Stock Exchange denying any fraud in the process. According to the records, the misstatements took place in 2012 and 2013, before Alibaba Group Holding Ltd (NYSE:BABA) purchased 60% stake in the company.

Alibaba invested $800 million in the company and changed its name from ChinaVision Media Group Ltd. to Alibaba Pictures Group Ltd (HKG:1060). The film company said that it would work with a third-party accounting consultant to improve its internal accounting process. The acquisition of picture company is an important part of Alibaba’s plan to enter the entertainment industry.

Alibaba Group Holding Ltd (NYSE:BABA)

The shares of Alibaba Pictures Group Ltd (HKG:1060) have been suspended from trading and are likely to resume trading after financial approval through board meeting on December 19. However, the primary outcome from the matter puts a question mark on Alibaba Group Holding Ltd (NYSE:BABA)’s diligence before acquiring the company.

Tony Chu, RS Investments’ portfolio manager, said,

“There are far more stakeholders now, and the company will be judged by the market.” He further added that Alibaba’s deal will be under more scrutiny and any similar issues in future might affect its share prices in future.

The shares of Alibaba Group Holding Ltd (NYSE:BABA) are trading at $103.88 and its shares have witnessed 10% increase since its initial public offering in September.

This article has been written by Prakash Pandey.

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