The company warned that its financial results may be affected and that publication will be delayed.
It is unclear whether the Alibaba Pictures Group problems will have a knock on effect on the parent company IPO. Recent reports had suggested that Alibaba’s pre-flotation investor roadshow would start in mid-September.
The film division was formed around the 60% stake in a listed company, ChinaVision, for which Alibaba paid over $800 million.
Alibaba Pictures said that its new management had discovered discrepancies relating to the old ChinaVision.
“The board would like to inform the company’s shareholders and potential investors that, during this review, the new management has identified certain possibly non-compliant treatment of financial information in the Company’s accounting records covering periods prior to completion of the subscription. In addition, on the basis of the initial review, the new management is of the preliminary view that insufficient provision for impairments of certain assets for the six months ended 30 June, 2014, is likely to have been made,” it said in a regulatory filing.
Alibaba Pictures recently hired former China Film Group vice president Zhang Qiang to be its CEO. It expects to be a co-investor alongside numerous film production companies and already has deals in place with Wong Kar-wai’s Block 2 Films, Stephen Chow, Peter Chan’s We Pictures and Taiwan-based Star Ritz Intl., which represents certain film properties by novelist-director Giddens Ko.
Alibaba has rapidly grown an entertainment business through acquisitions and stake purchases that bolster its cloud computing and home-shopping activities. Other deals include stakes in Internet TV company Wasu Media and online video company Youku Tudou.