What happened
Shares of Bilibili (BILI 6.12%) were down 11.7% week to date through Thursday's close, according to data provided by S&P Global Market Intelligence.
The online video platform was one of more than 80 companies that was added this week to the Securities and Exchange Commission's (SEC) list of companies that could be delisted from U.S. stock exchanges if they do not comply with U.S. auditing standards over a period of three consecutive years.
So what
The threat of expulsion from U.S. exchanges has pressured several top Chinese stocks over the last year. The SEC's move to name Bilibili as a commission-identified issuer under the Holding Foreign Companies Accountable Act came after the company filed its annual report.
In a press release, Bilibili said it would "continue to comply with applicable laws and regulations in both China and the United States, and strive to maintain its listing status on both Nasdaq and the Hong Kong Stock Exchange."
Image source: Getty Images.
Now what
Bilibili's business is not growing as fast as it was a year ago, but it's still posting strong growth in key operating metrics. For the fourth quarter, revenue grew 51% year over year, driven by a 37% increase in average monthly paying users. Users spent a daily average of 82 minutes on the platform. There was balanced growth across value-added services (premium memberships), advertising, and e-commerce revenue.
Despite strong growth, the stock is currently down 85% from its all-time high reached in early 2021. The company has been listed on the Nasdaq Stock Market since March 2018. If Bilibili can remain compliant with U.S. listing rules, there would obviously be enormous upside in the stock. But investors must take into consideration the risks, with China's regulatory standards for online gaming and social media platforms, in addition to heightened scrutiny by U.S. regulators.
