A media firm Alibaba Group Holding recently bought said on Friday a review of its finances revealed possible accounting irregularities, casting doubts on the Chinese e-commerce giant’s due diligence as it prepares for a U.S. initial public offering.
The announcement by Alibaba Pictures Group comes less than two months after Alibaba Group completed its $804 million purchase of a 60 percent stake in the film and TV production company once known as ChinaVision Media Group.
The deal was among the $10 billion or so Alibaba Group and its affiliates have spent since the beginning of last year on acquisitions which ventured beyond its traditional e-commerce roots to fend off competition from rivals like Tencent Holdings, Baidu Inc and JD.com.
But the speed at which the group has conducted some of its purchases has raised investor concerns. In June, Alibaba bought China’s most successful football club, the Guangzhou Evergrande, for $192 million in a deal which was hatched over a few drinks.
“They’re under a lot of competition pressure, which led them to make some of these deals, but I don’t think a lot of them are actually well thought out,” said Tony Chu, a Hong Kong-based portfolio manager at RS Investments.
“When you see the extent of the deals, there are so many of them recently announced, that raises the question as to how much due diligence the company has made on some of these deals,” he told Reuters.
Alibaba Group, whose platforms handle more goods than eBay and Amazon combined, is gearing up for a U.S. IPO this year that bankers and investors expect to surpass the $16 billion raised by Facebook Inc when it listed in 2012.
In a statement, Alibaba Group said it supported the review into Alibaba Pictures’ finances. “The new management team has a firm commitment to transparency, good corporate governance, and investor protection,” it said.
Deloitte Touche Tohmatsu was listed as the auditor of ChinaVision since 2011, according to the company’s 2013 annual report.
Deloitte said in an e-mailed statement that it could not comment on clients because of confidentiality reasons.
Days after completing the deal, Alibaba Group appointed a new board of directors for Alibaba Pictures and named Polo Shao, Alibaba’s chief risk officer, as chairman. Liu Chunning, a former Tencent executive who heads Alibaba’s digital entertainment business, was also appointed acting CEO.
Goldman Sachs advised Alibaba on the investment in Alibaba Pictures, while REORIENT Financial Markets Ltd advised the target company.
In its filing to the stock exchange, Alibaba Pictures said the possible “non-compliant treatment of financial information” was before the Alibaba purchase.
It asked for its shares to be suspended until further notice, and said it would delay reporting its interim results while its audit committee completes an inquiry into the financial statements.
“The company is not yet in a position to comment on the potential impact on its current and historical financial affairs of the matters described above,” Alibaba Pictures said.
Last month, it also issued a profit warning.
Shares of Alibaba Pictures last traded at HK$1.61 before they were halted on Friday. The stock has more than doubled since late February, prior to the announcement of Alibaba Group’s investment.
Before the Alibaba investment, the film and TV company counted Sequoia Capital among its biggest shareholders as well as Dong Ping, co-producer of the award-winning 2000 film “Crouching Tiger, Hidden Dragon”. Alibaba’s rival Tencent also owned a stake in Alibaba Pictures.
(Additional reporting by Paul Carsten and John Foley in Beijing; Editing by Miral Fahmy and Ryan Woo)
This article originally appeared on Recode.net.