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Some of China’s biggest online firms are taking a battering on Wall Street, following a report the U.S. Department of Justice is investigating accounting irregularities and may bring charges.
“There are parts of the Justice Department that are actively engaged in this area,” the SEC told Reuters. The SEC and FBI are also probing the matter.
Trading considerably down were the video sites Tudo and Youku, the portals Baidu (NSDQ: BIDU) and Sina (NSDQ: SINA), and the ad firm Focus Media.
Wall Street has hosted several Chinese internet floatations in the last couple of years. But there have also been concerns about accounting irregularities in the process.
This April, Rupert and Wendi Murdoch made a $29.4 million third-round investment in the Xunlei video site. In December, Xunlei identified “a significant deficiency and other control deficiencies in our internal control over financial reporting”, primarily non-compliance with US accounting rules. It has since hired financial executives with the necessary knowledge of compliance – and postponed a planned Nasdaq IPO.
Reuters: “The SEC has struggled to gain access to documents it needs in the investigation because strict Chinese laws have made auditors reluctant to turn them over.”