Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

Alibaba has found favor again with U.S. investors, rebounding from its February low. But the company still can't buy love in Hong Kong, where it first planned to list before departing for a New York float.

The latest battle: Hong Kong's takeover panel, part of the Securities and Futures Commission, ruled Tuesday that while it won't punish Alibaba, the Chinese e-commerce giant breached regulations when it bought a stake in Citic 21CN, a pharmaceutical firm, in early 2014.  The panel will announce that Alibaba, and founder Jack Ma's private equity firm Yunfeng Capital, should have made a general offer when they jointly purchased 54 percent of Citic 21CN for $170 million, according to a company filing. 

As it happens, Citic 21CN -- or Alibaba Health as it's now known -- has risen sixfold (516 percent) since that January 2014 acquisition, a windfall for shareholders who held on.  (Since September 2014, when Alibaba made headlines with its record $25 billion New York IPO, the drug unit's stock is little changed.)

Bounce, and Back
Alibaba Health surged after Alibaba bought into it in January 2014 but is little changed from the time its parent went public
Source: Bloomberg

With an online drugstore and database, Citic 21CN has clear value for Alibaba, though the health unit lost some shine earlier this year, when China said it will halt the implementation of a drug-coding system.

The e-commerce company has spent more than $30 billion in five years to buy into every part of daily life in China -- from the dating app Momo, which it's now in the process of taking private, to the online video firm Yukou Tudou.

Alibaba's purchases hit a record last year and are still rising
Source: Bloomberg

While Alibaba faces no penalty, Hong Kong's slap on the wrist clearly stung. The ruling, to be made public in a couple of weeks, should be appealed because the company ``believes that it has fully complied with the Takeovers Code."

This isn't the first time that Alibaba's rush into takeovers has tripped it up. ChinaVision, a film production firm purchased two years ago and since renamed Alibaba Pictures, turned out to have come with a slew of accounting issues, raising questions about haste and due diligence. 

Nor are the company's travails with the Securities and Futures Commission unprecedented. The Hong Kong authorities made no secret of their distaste for dual-class arrangements when Alibaba was considering a local listing, with a structure that effectively gave a partnership consisting of Ma and associates control over the board. Hence the move to New York by a company whose biggest shareholders are SoftBank of Japan and Yahoo!

With little love lost in Hong Kong, Alibaba's U.S. listing is looking more and more like a prescient move.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Nisha Gopalan in Hong Kong at

To contact the editor responsible for this story:
Paul Sillitoe at