When it comes to Alibaba's massive U.S. initial public offering, some investors may want to hesitate before saying "Open Sesame!"
That's because a unit of the massive Chinese e-commerce company, Alibaba Pictures Group, said on Thursday that it had found "possible non-compliant accounting treatments." The division suspended trading of its stock on Friday in Hong Kong.
The disclosure raises questions about Alibaba's strategy of snapping up Chinese companies, such as whether some of those smaller firms have less stringent financial controls than the parent company. Alibaba Pictures was previously known as ChinaVision Media Group, but earlier this monthit changed its name after Alibaba bought a 60 percent stake.
"People will take a look at their future M&A more carefully," Raymond So, dean of the business school at Hong Kong's Hang Seng Management College, told Bloomberg News. "In the past Alibaba was such a big name, but given this event, people in the future will have second thoughts about whether it's a good deal or not."
Alibaba's purchase of the movie company was one of more than a dozen acquisitions it's made this year, including Internet television company Youku Tudou for more than $1.2 billion and AutoNavi Holdings for more than $1.1 billion.
In the meantime, Alibaba is preparing to sell shares to U.S. investors for the first time, marking what may become the country's largest IPO ever. Even though the movie unit is a small part of the parent company, any financial irregularities may give potential investors pause ahead of the stock sale.
An Alibaba spokesman declined to comment, citing the company's quiet period before its IPO.
The stock sale could take place in the next several weeks and raise more than $20 billion, The Wall Street Journal notes. That place it ahead of such past massive stock sales as Visa, which raised $17.9 billion in 2008, and Facebook, which raised $16 billion in 2012.