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Jack Ma Cedes Control of Fintech Giant Ant Group

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Billionaire

Jack Ma

is ceding control of Ant Group Co., capping a tumultuous period for the Chinese fintech giant.

Mr. Ma will no longer be the controlling person of Ant, the company said in a statement on Saturday, confirming a previous report by The Wall Street Journal.

The changes are being made to reduce Ant’s reliance on the flamboyant Chinese billionaire, who co-founded

Alibaba Group Holding Ltd.

BABA 2.70%

and helped create Ant, the Journal reported previously.

Mr. Ma will continue to hold voting rights in an entity that controls Ant, alongside nine Ant executives and employees who will be also given voting rights.

Mr. Ma doesn’t hold an executive role at Ant or sit on its board, but is a larger-than-life figure at the company. He has controlled Ant via an entity in which he holds the dominant position. The agreements that allowed Mr. Ma’s dominance will be terminated. The nine other Ant executives and employees to be given the voting rights at the company can exercise their power independently of each other and of Mr. Ma, according to Ant’s statement.

Ant, which owns the popular digital-payment platform Alipay, has been forced to overhaul its operations amid a government crackdown that began with Beijing calling off the company’s multibillion-dollar initial public offering in November 2020. The IPO, which had been slated to happen in Shanghai and Hong Kong concurrently, would have raised more than $34 billion and valued Ant at more than $300 billion. 

Ant has been revamping its various business lines, from consumer lending to insurance, and will eventually become a financial holding company subject to regulations in line with traditional financial firms.

The change of control moves Ant a step closer to finishing its overhaul. Yet it also could put back a potential revival of Ant’s IPO for a year or more. Chinese securities regulations require a timeout on public listings for companies that have gone through a recent change in control.

Regulators didn’t demand the change but have given their blessing, the Journal reported previously. Ant is required to map out its ownership structure when it applies to become a financial holding company.

The nine others who will hold voting rights include Chairman

Eric Jing,

Executive Vice President Xiaofeng Shao and Chief Technology Officer Xingjun Ni, in line with the details in the previous Journal report. Mr. Shao is also the general secretary of Ant’s Communist Party committee, according to people familiar with the matter. Mr. Ni was instrumental in founding Alipay in 2004.

Mr. Ma has all but vanished from the public spotlight since he laid into Chinese regulators in a controversial speech days before Ant’s planned IPO in 2020. He retired from Alibaba in 2019 but continued to control Ant. The two companies that Mr. Ma co-founded have been charting separate courses in light of Beijing’s crackdown on big internet platforms. 

Mr. Ma’s control over Ant goes back more than a decade to the period when he was CEO of Alibaba. Throughout the years, he had contemplated giving up control of Ant out of corporate-governance concerns that risks may arise from Ant being too reliant on a single dominant figure atop the company, the Journal reported previously.

Write to Jing Yang at jing.yang@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Jack Ma Plans to Cede Control of Ant Group

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HONG KONG—Billionaire Jack Ma plans to relinquish control of Ant Group Co., people familiar with the matter said, part of the fintech giant’s effort to move away from affiliate Alibaba Group Holding Ltd. after more than a year of extraordinary pressure from Chinese regulators.

The authorities halted Ant’s $34 billion-plus IPO in 2020 at the 11th hour and are forcing the technology firm to reorganize as a financial holding company regulated by China’s central bank. As the overhaul progresses, Ant is taking the opportunity to reduce the company’s reliance on Mr. Ma, who founded Alibaba.

Mr. Ma, a 57-year-old former English teacher and one of China’s most prominent entrepreneurs, has been the target of government action that appears designed to reduce his influence and the power of his companies. He has controlled Ant since he carved its precursor assets out of Alibaba more than a decade ago. Over time he built it into a company that owns the Alipay payments network with more than one billion users, an investing platform that houses what was once the world’s largest money-market fund, and a large microlending business. Ant was expected to be valued at more than $300 billion had it gone public.

Diminishing his ownership could put back a potential revival of Ant’s IPO for a year or more. Chinese securities regulations require a timeout on public listings for companies that have gone through a recent change in control.

Mr. Ma doesn’t hold an executive role at Ant or sit on its board, but is a larger-than-life figure at the company and currently controls 50.52% of its shares via an entity in which he holds the dominant position. He could relinquish his control by transferring some of his voting power to other Ant officials including Chief Executive

Eric Jing,

after which they would collectively control the company, some of the people said.

Ant told regulators of Mr. Ma’s intention to cede control as the company prepared to convert into a financial holding company, the people familiar with the matter said. Regulators didn’t demand the change but have given their blessing, the people said. Ant is required to map out its ownership structure when it applies to become a financial holding company.

The People’s Bank of China has yet to officially accept Ant’s application to become a financial holding company. Any change of control isn’t likely to materialize until Ant’s restructuring is complete.

Ant owns the Alipay payments network that has more than one billion users.



Photo:

Qilai Shen/Bloomberg News

Mr. Ma has personally contemplated ceding control of Ant for years, some of the people said. He has been concerned about the corporate-governance risks arising from being too reliant on a single dominant figure atop the company, those people said.

The charismatic founder addressed those risks at Alibaba years ago by setting up a partnership structure to ensure a sustainable succession as its first generation of leaders moved on. He gave up the CEO job at Alibaba in 2013 and stepped down as chairman in 2019 when he retired from the company. He currently holds less than 5% of Alibaba’s shares.

American depositary shares of Alibaba traded in the U.S. fell 2.2% on Thursday. They have lost nearly half their value over the past 12 months.

The need to end Mr. Ma’s control at Ant gained new urgency as the souring regulatory environment spurred Ant and Alibaba to cut their ties. On Tuesday, Alibaba revealed seven top Ant executives had stepped down from the Alibaba partnership, the top echelon of management at Alibaba and its subsidiaries. The two companies also terminated long-running commercial and data-sharing agreements that had given Alibaba an edge.

Mr. Ma previously held back from giving up control of Ant because he didn’t want to delay the company’s plans for an initial public offering, some of the people familiar with the matter said. The scuttling of those plans—after Mr. Ma laid into financial regulators in a speech—removed that obstacle and created a fresh opportunity for Mr. Ma to resolve the matter, those people said.

A change in control could mean that Ant will have to wait a while longer before it tries going public again. Chinese securities regulations state that companies can’t list domestically on the country’s A-share market if they have had a change of controlling shareholder in the past three years—or in the past two years if listing on Shanghai’s Nasdaq-like STAR Market.

In less than six months, China’s tech giant Ant went from planning a blockbuster IPO to restructuring in response to pressure from the central bank. As the U.S. also takes aim at big tech, here’s how China is moving faster. Photo illustration: Sharon Shi

Hong Kong also imposes a waiting period but only for one year. Ant’s scuttled IPO plan included simultaneous listings in the former British colony as well as Shanghai.

Ant is in no rush to attempt an IPO again and intends to keep its options open, some of the people said. The company could consider other moves including spinning off units that could in turn be listed themselves, those people said.

Mr. Ma controls Ant through an entity called Hangzhou Yunbo Investment Consultancy Co., which in turn controls two vehicles that together own a little more than half of Ant’s shares.

Mr. Ma has a 34% stake in Hangzhou Yunbo. The other 66% is split evenly among Ant’s CEO, Mr. Jing, former CEO

Simon Hu

and veteran Alibaba executive and former Ant nonexecutive director Fang Jiang.

The billionaire originally owned all of the entity. He transferred two-thirds of the shares to the three executives in August 2020 before Ant filed its IPO prospectus. At the same time, Mr. Ma was given veto power over Hangzhou Yunbo’s decisions, according to the prospectus. The arrangement was designed to give the other executives more say in Ant’s affairs without triggering an effective change in control that could delay the IPO, a person familiar with the matter said.

Jack Ma doesn’t hold an executive role at Ant or sit on its board but controls 50.52% of its shares via an entity in which he holds the dominant position.



Photo:

bobby yip/Reuters

Mr. Ma could cede control of Ant by diluting his voting power in Hangzhou Yunbo via giving up his veto and transferring some of his stake to other executives, the person said.

Mr. Hu, who resigned as Ant’s CEO last year and recently retired, and Ms. Jiang, who left Ant’s board last year, will likely exit Hangzhou Yunbo and be replaced by other Ant executives. In addition to Mr. Jing, Ant’s most senior executives are now Executive Vice President Xiaofeng Shao and Chief Technology Officer Xingjun Ni. Mr. Shao is also the general secretary of Ant’s Communist Party committee, according to people familiar with the matter. Mr. Ni was instrumental in founding Alipay in 2004.

Mr. Ma’s control over Ant goes back more than a decade to the period when he was CEO of Alibaba. In 2011, it emerged that he had carved the payments business Alipay out of Alibaba without the knowledge of key shareholders including Yahoo Inc. and

SoftBank Group Corp.

9984 0.37%

Alibaba argued the transfer was needed for Alipay to secure a Chinese license that might not have been granted if the company had foreign shareholders. Following the move, China’s central bank in May 2011 gave Alipay a license to operate as a payment-services company. Yahoo and SoftBank were later compensated by an agreement that allowed them to share economic interests in Ant through their ownership in Alibaba.

In 2014, Ant Financial Services Group was created to hold Alipay and other financial businesses including consumer lending. The company in 2020 changed its name to Ant Group.

Write to Jing Yang at Jing.Yang@wsj.com and Raffaele Huang at raffaele.huang@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Alibaba to Buy Back Up to $25 Billion of Stock

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Alibaba Group Holding Ltd.

BABA -4.35%

boosted its share buyback program to $25 billion from $15 billion, in a bid to reassure investors about the company’s prospects after a year in which its stock has fallen by more than half.

The potential buybacks are substantial compared with the Chinese e-commerce giant’s market value: As of Monday, it had a market capitalization of about $270 billion, according to FactSet.

The modified repurchase program will be effective for two years through March 2024,

Alibaba

BABA -4.35%

said on Tuesday morning Hong Kong time. It said the 67% increase in the firepower allocated for buybacks was “a sign of confidence about the company’s continued growth in the future.”

Chinese technology stocks in Hong Kong, China and in the U.S.—where they are listed as American depositary receipts—have been highly volatile recently amid worries that U.S. regulators may move to delist Chinese companies as soon as 2024 and signs that Beijing’s long-running regulatory crackdown will continue.

Alibaba’s New York Stock Exchange-listed ADRs are down nearly 13% so far this year—and have fallen about 57% over the past 12 months—according to FactSet. Its stock also trades in Hong Kong, where shares jumped 11% Tuesday.

Alibaba said it repurchased about $9.2 billion worth of ADRs as of March 18 under its previous program. That sum will count toward the new $25 billion total.

Citigroup analysts said the enlarged buyback plan was “likely the largest share repurchase program ever in China’s internet sector,” and suggested Alibaba’s management viewed its stock as undervalued and attractive.

Separately, the company said Weijian Shan, executive chairman of investment group PAG, would join the board as an independent director starting March 31.

Ericsson

Chief Executive

Börje Ekholm,

who has served on the board since 2015, will step down the same day, Alibaba said.

Many companies use buybacks to return cash to shareholders. The plans can help support stock prices by signaling confidence in the company’s outlook and its financial health, while boosting earnings per share. In recent years, they have also caused controversy, with critics arguing it would be better to reinvest the money back into the business, in areas like equipment, research and higher wages.

Companies on the S&P 500 have poured more than $5.3 trillion into repurchasing their own shares since 2010. WSJ explains how stock buybacks work, and why there’s debate over whether or not they’re good for the economy.

S&P 500 firms outlined $238 billion of buyback plans in the first two months of 2022, according to Goldman Sachs, and the bank has forecast the full-year total could rise 12% to $1 trillion.

Some of the biggest U.S. technology companies have embraced even bigger repurchase programs than Alibaba. Last year, for example, Google’s parent company

Alphabet Inc.

and

Microsoft Corp.

earmarked up to $50 billion and $60 billion, respectively, for buybacks.

Write to P.R. Venkat at venkat.pr@wsj.com and Quentin Webb at quentin.webb@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the March 22, 2022, print edition as ‘Alibaba Increases Share Buybacks to $25 Billion.’

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Business

SoftBank Pitches IPO for Arm After Deal With Nvidia Falls Through

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TOKYO—After a deal that could have been worth $80 billion to his company fell apart,

SoftBank Group Corp.

9984 5.85%

Chief Executive

Masayoshi Son

is playing salesman for Plan B—an initial public offering of chip designer Arm.

Mr. Son sounded as if he were on a roadshow for investors at a news conference in Tokyo on Tuesday. He said Arm is entering a “golden period” of high demand for the chips it helps create in smartphones, electric vehicles and computer-server farms operated by the likes of

Amazon.com Inc.

The pitch came hours after the Japanese investment and technology conglomerate said it was abandoning plans to sell Arm to Nvidia Corp.—in what would have been the largest semiconductor deal on record—because antitrust concerns stood in the way.

Mr. Son said he was surprised to see the backlash not only from U.S. regulators who sued to block the deal in December but also big tech companies that rely on Arm’s chip designs.

“We saw strong opposition because Arm is one of the most important and essential companies that most companies in the IT industry or in Silicon Valley rely on, either directly or indirectly,” he said.

SoftBank paid $32 billion when it acquired the U.K.-based chip business in 2016. Mr. Son said the sale to Nvidia, under which SoftBank would have received both cash and Nvidia shares, could have been worth $80 billion because of a rise in Nvidia’s share price.

SoftBank now plans to pursue a public listing of Arm by March 2023. Arm shares will most likely be listed on the tech-heavy

Nasdaq Stock Market

in the U.S. because many of Arm’s clients are based in Silicon Valley, Mr. Son said.

He said SoftBank didn’t intend to keep Arm for itself because he wanted outside investors in the SoftBank-led Vision Fund, which owns a quarter of Arm, to be able to cash in through an IPO and because he wanted to give stock options as incentives to Arm employees.

Uncertainties linger around an Arm IPO, including whether the volatile semiconductor business will stay hot through this year.

Chinese tech stocks popular among U.S. investors have tumbled amid the country’s regulatory crackdown on technology firms. WSJ explains some of the new risks investors face when buying shares of companies like Didi or Tencent. Photo Composite: Michelle Inez Simon

Tech shares have fallen recently because of tightening by the Federal Reserve. Fumio Matsumoto, chief strategist at

Okasan Securities,

said that made the timing for a big IPO less than ideal, and he also observed that a strategic buyer in the chip industry might pay more for Arm because of the potential synergy effects.

Still, Mr. Matsumoto said the downturn in Silicon Valley also offered opportunities for Mr. Son, and it made sense to raise cash for his war chest from an Arm IPO. “Because technology share prices have gone through a sharp correction over the past year, we are seeing a good cycle to consider preparing” for new investments, Mr. Matsumoto said.

After a rough patch a few years ago, Arm is on track for $2.5 billion in revenue this fiscal year, which ends in March, up from $1.98 billion the previous year, SoftBank said. Arm’s operating profit, according to one type of calculation used by SoftBank, more than doubled over the past two years to a projected $900 million this fiscal year.

An array of consumer electronics companies as well as semiconductor companies, including

Apple Inc.,

Samsung Electronics Co.

and

Qualcomm Inc.,

use Arm’s designs in at least some of their chips. The designs are known for their low power consumption, making them nearly ubiquitous in mobile devices.

The collapse of the Arm deal is just one of the challenges Mr. Son is tackling in his globe-spanning investment portfolio. He said “we are in pain” over China’s crackdown on its big tech companies, which hit SoftBank investments including its most valuable one, e-commerce giant Alibaba Group Holding Ltd.

The past two years have seen some of the wildest swings in the four decades since Mr. Son started SoftBank. The pandemic, initially seen as a blow, soon emerged as a boon for many technology businesses including those in which SoftBank has invested. SoftBank shares surged, only to fall by half from their recent peak when the China troubles hit and the Arm deal ran aground.

SoftBank’s net asset value, Mr. Son’s preferred measure of the company’s finances, fell by ¥1.6 trillion, equivalent to about $14 billion, in the October-December quarter to ¥19.3 trillion. That is a fall of 30% from the peak in September 2020 and the lowest level since 2017.

Mr. Son blamed the sharp fall in Alibaba shares. The Chinese company, which once made up the majority of SoftBank’s net assets, now accounts for less than a quarter of the total.

SoftBank said it unloaded a small number of Alibaba shares to settle contracts with its lenders, but Mr. Son said SoftBank’s stake in the Chinese company remained close to a quarter.

Mr. Son, who turns 65 this year, has lost a number of top lieutenants in recent years, including Chief Operating Officer

Marcelo Claure,

who stepped down in January after a pay dispute. Mr. Son said that while he was grooming successors, he didn’t intend to step down soon.

“If I stop, I’d become an old grandpa very quickly,” he said. He boasted that when he went bowling recently, he topped 200 points in two different rounds—a fine score for an amateur. “I thought, ‘Hey, I’m still pretty young,’ ” he said.

—Sam Schechner in Paris contributed to this article.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com and Peter Landers at peter.landers@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

What Happens When Stocks Delist? What to Know If You Own Didi.

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Text size

The regulatory environment is tough for Chinese stocks, but delisting doesn’t happen overnight.


Angela Weiss/AFP via Getty Images


Didi Global

‘s plans to delist from the New York Stock Exchange months after going public triggered concerns over the future of other U.S.-listed Chinese companies.

Chinese tech stocks have borne the brunt of this blow to market sentiment, with the


Hang Seng Tech Index
—which tracks the Hong Kong-listed shares of China’s largest technology companies—hitting an all-time low earlier this week.


Alibaba

(ticker: BABA) and


JD.com

(JD), which are listed in both Hong Kong and the U.S., have been some of the biggest losers. 

Didi’s delisting decision comes amid brewing regulatory pressures in both Washington and Beijing. The Securities and Exchange Commission finalized rules last week that would force foreign companies to open their books to U.S. auditors or be delisted from U.S. markets if they don’t comply for three years. Reports from China, beginning last week and continuing this week, indicate that the country’s market regulator is scrutinizing the corporate structure used by companies that list overseas.

Analysts are split on what will happen next for Alibaba, JD.com, and other U.S.-listed Chinese stocks. “The risk of eventual delisting is real,” Robin Zhu, a Bernstein analyst, told Barron’s. Needham analyst Vincent Yu doesn’t agree: “On the Chinese regulator’s side, there’s no intention to delist them.”

Mass delistings would be a chaotic and dramatic move. And as Barron’s has previously reported, experts think regulators could reach a compromise within the three-year window provided by the SEC’s rule that would prevent delisting. But concerns and regulatory pressure are unlikely to disappear soon.

Here’s what investors should consider if they own these stocks. 

What Are ADRs and How Do They Work?

Investors in U.S.-listed foreign companies own shares of an American depositary receipt, or ADR. Here’s how they work.

U.S. banks bundle shares of foreign-listed companies into ADRs, which are issued as stock that can be traded on U.S. exchanges in dollars. Foreign companies, in turn, gain access to U.S. capital.

But in the case of a U.S.-listed Chinese stock, investors own shares in an offshore holding company. These shell companies are called variable interest entities, or VIEs, and are a corporate structure used by Chinese companies to circumvent Beijing’s rules about foreign investment while still tapping U.S. capital. The offshore company has a contractual relationship with the operating company, which means investors don’t have a direct stake.

VIEs are under scrutiny in both the U.S. and China. SEC Chair Gary Gensler said earlier this year he worried investors didn’t realize how these companies work and pushed for more oversight and transparency. Based on recent reports from China, regulators in Beijing are also looking to crack down on VIEs, especially technology or data-heavy companies.

What Happens to Your Shares When a Company Delists?

If a U.S.-listed Chinese company like Didi delists, there are essentially three possible outcomes for investors: a share buyback, share transfer, or share limbo.

In a buyback scenario, the Chinese company could purchase its shares back from investors at a price agreed upon by shareholders—effectively going private. If the company wishes to go public again, it would do so in a separate listing in the likes of Hong Kong.

In a share transfer scenario, investors would swap their ADR for the Chinese company’s foreign stock. In the case of Didi, which doesn’t have a secondary listing, would need to first launch a listing—in Hong Kong or Shanghai, for instance— to establish both a home for its foreign stock and mechanism for the transfer of ADRs.

If Didi doesn’t buy back shares, but rather delists and doesn’t launch another listing, the ability to trade its shares would be in limbo. Investors would still own equity in the company, but they’d be unable to trade their stock on regulated exchanges. They could sell their shares in over-the-counter markets—with limited liquidity—or hold on to them until a suitable listing was launched.


China Mobile
,
which was blacklisted by the Trump administration because of its ties to China’s military, remains a cautionary tale. The widely held stock was forced to delist from the New York Stock Exchange, leaving many individual investors unable to execute trades or transfers at their U.S. broker.

What Choices Do Investors Have?

Concerned investors have a few options if they believe that they own stock that could be delisted and want to get ahead of the risk.

The first is to sell their stake in U.S.-listed Chinese companies. If investors still want to own shares of Chinese companies, they can try to buy a stake on a foreign exchange through a brokerage. That option isn’t available on every brokerage, though.

There are other options too, including converting an ADR into a stake. Explore those options at the links below:

• How to Buy Chinese Stocks Now That U.S.-Listed Shares Have Become Risky

• How Funds Can Help Investors Navigate China

Write to Jack Denton at jack.denton@dowjones.com

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Business

Stock Market Today: Dow and Oil Drop as Covid Fears Grip Europe While Tech Rises

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Current Chair Jerome Powell is viewed as likely to be renominated as leader of the Federal Reserve.


Justin Sullivan/Getty Images

Technology stocks popped on Friday, while the


Dow Jones Industrial Average
fell and bond yields dipped alongside a new surge in Covid-19 cases. 

In midday trading, the Dow slid 174 points, or 0.5%, after the index slipped 60 points Thursday to close at 35,870. The


S&P 500
was rising 0.2% after the index closed at an all-time high Thursday. The technology-heavy


Nasdaq Composite
rose 0.7%.

The 10-year Treasury yield fell to 1.53% from a Thursday close of 1.61%. That’s a steep drop for one day, bringing it farther below its second half 2021 peak of 1.7%, hit in late October. 

That bodes well for the tech trade. Lower bond yields make futures profits more valuable—and fast-growing companies in the sector are expecting a large share of their profits to come many years down the line. 

Consistent with that, the S&P 500 is outperforming the Dow because of its concentration in technology. Outside of tech, stocks were having a rough day; almost 60% of S&P 500 stocks were in the red, according to FactSet.

Ultimately, market participants are rushing into safety Friday. The drop in the yield means investors are buying up the bond, sending the price higher. This comes as new Covid-19 cases perk up in Europe, prompting Austria to announce lockdowns beginning next week. 

Also not helping investors’ appetite for risk was economic data out of Germany. The countries’ producer-price index gained 3.8% month-over-month, higher than the expected 1.9% and above the previous result of 2.3%. Such strong inflation could compel the European Central Bank to hike interest rates, which could choke off economic growth, ultimately lowering inflation. ECB President Christine Lagarde said Monday morning that the central bank is currently unlikely to raise rates in 2022. Still, economic data will help guide monetary policy.  

The price of oil also dropped. WTI crude oil fell 4.2% to $75.70 a barrel. It’s down 9% from its 2021 high of more than $84 a barrel hit on Nov. 9. 

Oil stocks slid, too. The 


Energy Select Sector SPDR
Fund (XLE) fell more than 3%. It’s down just over 7% since the end of October when it hit a 2021 high. 

Overseas, Hong Kong’s


Hang Seng
Index fell 1.1%, underperforming other bourses in Asia as it was weighed down by a stark fall in


Alibaba

(ticker: BABA and 9988.H.K.) stock following the Chinese e-commerce giant’s quarterly results Thursday that showed slowing growth. The pan-European


Stoxx 600
fell 0.3%.

Here are five stocks on the move Friday:


Intuit

(INTU) stock gained 9.5% after the company reported a profit of $1.53 a share, beating estimates of 97 cents a a share, on sales of $2 billion, above expectations for $1.8 billion. 


Williams-Sonoma

(WSM) stock rose 0.6% after the company reported a profit of $3.32 a share, beating estimates of $2.56 a share, on sales of $2.1 billion, above expectations for $1.8 billion. 


Foot Locker

(FL) stock dropped 12% even after the company reported a profit of $1.93 a share, beating estimates for $1.37 a share, on sales of $2.19 billion, above expectations for $2.15 billion. 


Nvidia

(NVDA), which has been on a tear this week—up around 7% over the last five days—was rising again, climbing 4%.


Workday

(WDAY) was sliding, down 3.1% despite posting better-than-expected earnings late Thursday.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

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Business

Stock Market Today: Alibaba Gains, Novavax Drops, and the Dow Rises

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Macro concerns such as supply-chain issues appear to be on the back burner amid earnings season.


Brendan Smialowski/AFP via Getty Images

The stock market was higher Wednesday, as investors weighed the prospect of strong corporate earnings against broader concerns over the economy.

In midday trading, the


Dow Jones Industrial Average
added 160 points, or 0.5%, while the


S&P 500
—which marked its fifth consecutive session of gains Tuesday—rose 0.4%. The


Nasdaq Composite
was up 0.2%.

Earnings season continued apace Wednesday, with


Abbott Laboratories

(ticker: ABT),


Verizon

(VZ),


Biogen

reporting Wednesday morning—they all beat—following


Netflix

(NFLX) and


United Airlines

(UAL) results Tuesday evening. One thing that stands out: With 16% of S&P 500 market cap having reported, results are nowhere near as good as bank earnings suggested last week, according to Credit Suisse strategist Jonathan Golub. While earnings have topped estimates by 14.1% overall, financials have topped forecasts by 21.6%, while everyone else has surpassed expectations by just 6.3%. It’s something to keep an eye on as earnings season progresses.

Wider concerns around familiar themes—such as inflation, central bank stimulus, and supply-chain disruptions—appear to have been allayed for now, as profit margins continue to hold up.

“Whilst inflation concerns are still very much bubbling under the surface of markets, risk appetite strengthened further yesterday thanks in no small part to decent earnings reports,” said Jim Reid, a strategist at Deutsche Bank. “There are no signs of widespread erosion of margins at the moment. Perhaps there is so much money sloshing about that for now prices are broadly being passed on.”

Still, bond yields now sit above 1.6% after trading over 1.65% on Tuesday, and that could pressure stocks. Higher bond yields typically weigh on technology companies in particular, because they tend to discount the present value of future cash flows, and the valuations of many tech companies are grounded in profits expected years in the future.


Tesla

(TSLA) and


IBM

(IBM) are among the companies releasing financial results in the day ahead.

Meanwhile,


Bitcoin
prices touched an all-time high above $66,000. The leading cryptocurrency has been buoyed by the launch of the first exchange-traded fund tracking regulated Bitcoin futures—a landmark moment for the crypto industry. 

Trading in the ProShares


Bitcoin Strategy ETF
(BITO) began Tuesday and most of the substantial volume was driven by high-frequency traders and retail investors, according to analyst Jeffrey Halley of broker Oanda.

“Although a regulated ETF based on regulated futures does fit nicely into the mandates of many in the institutional space, I suspect they may wait a while before dipping their toes in the water,” Halley said.

Here are eight stocks on the move Wednesday:


Novavax

(NVAX) dropped 11% following a report alleging that manufacturing problems jeopardize billions of Covid-19 vaccine doses set to be delivered to low- and middle-income countries.

Verizon gained 2.6% after the company reported better-than-expected earnings.

Netflix stock fell 1.2% despite reporting better-than-expected earnings after Tuesday’s close. The stock was downgraded to Hold from Buy at Deutsche Bank.


Alibaba

(BABA) stock rose 0.5% one day after gaining 6.1% on reports that it would make its own chips and that Jack Ma would be traveling to Europe.

The U.S.-listed shares of Dutch semiconductor equipment manufacturer


ASML

(ASML) fell 4.3% after the company outlined revenue guidance for the next quarter below Wall Street’s estimates.


Nestlé

(NESN.Switzerland) rose 3.3% in Zurich, as the food and drinks giant raised its full-year sales outlook after posting revenue ahead of analyst expectations—citing strong retail spending.


Deliveroo

(ROO.U.K.) rose 3.2% in London, as the food delivery company upgraded its full-year forecast after reporting strong order growth in the third quarter.


Kering

(KER.France) fell 4% in Paris, as the luxury-goods group, which owns brands including Gucci, saw sales growth held back in the crucial Asian-Pacific region by rising Covid-19 cases over the summer. But the company as a whole posted sales ahead of expectations.

Write to editors@barrons.com

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Business

Stock Market Today: Dow Is Under Pressure, China Gaming Stocks Dive, Oil Higher

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Chinese gaming stocks have plunged over fears of a crackdown in Macau.


(Paul Yeung/Bloomberg)

September is historically a bad month for stocks, and this is a particularly bad September. Dating back to 1928, the average September return for the S&P 500 has been a loss of 0.99%, and, halfway through the month this year, the index already has fallen more than 1.7%.

Wall Street was poised for a mixed day on Wednesday after another miserable day of trading Tuesday. Equities in Europe and Asia were mixed as well amid fear of a stock-market correction.

Rising Covid-19 cases around the globe are denting sales for many companies. Weak economic data from August aren’t helping stocks either.

Futures for the

Dow Jones Industrial Average

pointed down 21 points after the index tumbled 292 points on Tuesday to close at 34,577. Futures for the

S&P 500

and

Nasdaq

were both up 0.1%.

Overseas, Hong Kong’s

Hang Seng Index

fell 1.8% as Asian investors focused on a sharp slowing in Chinese retail sales. The consensus expectation was for August retail sales to grow 7% year over year, but the reading came in at just 2.5%. Industrial production rose 5.3%, below expectations for 5.8%.

The poor data “weighed on risk assets overnight,” wrote Tom Essaye, founder of Sevens Report Research.

The pan-European

Stoxx 600

was down 0.4%, with the spotlight falling on U.K. inflation, which rose to 3.2% in August in the biggest-ever yearly leap.

Analysts have noted that investor sentiment more broadly is mixed as concerns continued to center on whether a broader market correction is coming.

“Yesterday, the S&P 500 closed -0.32% away from its 50-0day moving average, and the index has only closed below that trailing average on one occasion since March 8 (back on June 18),” noted Jim Reid, a strategist at Deutsche Bank. “Overall we haven’t seen a correction yet, as many expect, but we have seen a stalling.”

On Monday, Reid and his team published a monthly survey of more than 550 global finance professionals showing that 58% expect an equity correction of between 5% and 10% before the end of the year. Another 10% saw a market correction of more than 10% ahead.

In commodity markets, oil prices moved higher, continuing a rally. Futures for international benchmark Brent crude were up 1.3%, trading hands above $74.50 a barrel. U.S. oil futures rose similarly, with West Texas Intermediate trading above $71.40.

In the day ahead, U.S. economic data for markets to digest includes industrial production figures for August and New York’s Empire State manufacturing index for September.

Here are 15 stocks on the move Wednesday:

Gambling stocks exposed to Macau—the world’s largest gaming center—have plunged as Chinese regulators turned their attention to the sector.

Sands China

dove 33% and

Wynn Macau

tumbled 29% in Hong Kong, with their U.S. parents feeling the pressure as well:

Las Vegas Sands

(ticker: LVS) and

Wynn Resorts

(WYNN) were both down 5% in U.S. premarket trading.


Softbank

fell 6% in Hong Kong as concerns continued over regulatory scrutiny on the Chinese technology sector, including

Alibaba

(BABA)—to which Softbank is heavily exposed.

Cyber security specialist

Darktrace

rose 10% in London after posting upbeat quarterly results—its first since going public. The company raised forecasts for both revenue growth and profit margins next year.

The luxury-goods sector remains under pressure for a second day amid concerns over the spread of Covid-19 in Asia—the industry’s most critical market.

LVMH

fell 3.3% in Paris,

Burberry

was down 2.4% in London,

Richemont

slipped 2.7% in Zurich and

Kering

declined 3.9% in Paris.


Yum China Holdings

(YUMC) stock fell 4.4% after the company said its operating profit for the third quarter may fall 50% to 60% year over year, as Covid-19 outbreaks in China hit sales. 


Regeneron Pharmaceuticals

(REGN) stock gained 2.2% after the company said it is selling an additional 1.4 million doses of its monoclonal antibody treatment for Covid-19 to the U.S. government.


Sage Therapeutics

(SAGE) rose 3.3% after the Food and Drug Administration gave the company a fast-track designation for its Huntington’s Disease treatment.


Microsoft

(MSFT) stock gained 1.2% following news that the company is raising its dividend. 


Werner Enterprises

(WERN) stock gained 1.7% after getting upgraded to Outperform from Market Perform at Cowen. 

Write to editors@barrons.com

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Business

Cathie Wood’s ARK Hasn’t Given Up Completely on China Stocks. Where It Sees Tremendous Opportunity.

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Illustration by Elias Stein

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Cathie Wood’s ARK Invest recently dumped most of the Chinese holdings from its actively managed exchange-traded funds as Beijing cracked down on tech companies. But the firm hasn’t completely given up on China.

ARK still sees tremendous opportunity in the digitization of Chinese healthcare. China’s healthcare system has long been overburdened, and high-quality medical resources are scarce, writes ARK analyst Yulong Cui. The biggest and best-quality facilities account for less than 10% of China’s 30,000 hospitals but handle more than half its total visits. Patients can wait for days before receiving care from the most seasoned and reputable physicians.

So far, the digitization of healthcare in China has lagged far behind advances in mobile payments, food delivery, and other forms of e-commerce. But China wants to change that: Since 2015, the government has introduced a series of policy shifts to steer more healthcare solutions online, according to Cui. Result: Online consultations in China are likely to increase from 6% of all outpatient visits in 2019 to 50% by 2025, ARK estimates. That could mean a $50 billion market.

Ping An Healthcare and Technology,

Alibaba Group Holding,

and

JD.com

all have their own digital health platforms. Private firms in the space are also growing fast. Tencent-backed WeDoctor, for example, is planning to go public on the Hong Kong stock exchange later this year. The ARK Autonomous Technology & Robotics exchange-traded fund and

ARK Fintech Innovation

ETF have some exposure to those stocks. ARK has also been a big investor in U.S. telemedicine stocks such as

Teladoc Health.

Next Week
Monday 8/16


Tencent Music Entertainment Group,


Tokyo Electron,

and

Clear Secure

are among the companies holding earnings conference calls.

The Federal Reserve Bank of New York releases its Empire State Manufacturing Survey for August. The consensus estimate is for a 26.5 reading. That compares with a record high of 43.0 in July, when the general business conditions index rose 26 points.

Tuesday 8/17

BHP,

Walmart,


Home Depot,


Agilent Technologies,

Pandora, and

Krispy Kreme

are among the companies hosting earnings conference calls.


America’s Car-Mart,


Jack Henry & Associates,

and

La-Z-Boy

report financial results after the market closes and will hold earnings calls the following morning, Aug. 18.

The Federal Reserve releases capacity utilization in the industrial sector for July. Consensus calls for a 75.7% reading, little changed from June’s 75.4% reading. Industrial production is seen rising 0.5% from June’s 0.4% seasonally adjusted increase.

The National Association of Home Builders releases its NAHB/

Wells Fargo

Housing Market Index for August. Economists forecast an 80 reading, the same as in July. The index is down from its all-time high of 90 set in November.

Federal Reserve Board Chairman Jay Powell will host a virtual town hall with educators and students.

The Census Bureau reports retail sales data for July. Expectations are for a 0.3% seasonally adjusted month-over-month decrease, following a 0.6% rise in June. Excluding autos, spending is seen rising 0.2%, compared with a 1.3% rise in the previous month.

Wednesday 8/18


Cisco Systems,


Lowe’s,

Target,

TJX,


Tencent Holdings,


Brinker International,


Analog Devices,


Synopsys,


Lumentum Holdings,

and

Nvidia

host earnings conference calls.

The Federal Open Market Committee releases the minutes from its late-July monetary-policy meeting.

The Census Bureau’s new residential construction report for July is expected to show the seasonally adjusted annual rate of housing starts at 1.610 million, down from June’s 1.643 million. Housing starts hit a postpandemic peak of 1.73 million in March.

Thursday 8/19


BJ’s Wholesale,


L Brands,


Applied Materials,


Ross Stores,


Estée Lauder,


Kohl’s,


Macy’s,


Performance Food Group,


Petco Health and Wellness,

and Farfetch host earnings conference calls.

The Conference Board releases its Leading Economic Index for July. The LEI is expected to increase 0.7% month over month, after gaining 0.7% in June.

Friday 8/20

Deere and

Foot Locker

host conference calls to discuss financial results.

Write to Evie Liu at evie.liu@barrons.com

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Business

Sexual-Assault Allegation at Alibaba Triggers Outrage, Investigation

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An allegation of sexual assault against a manager at Alibaba Group Holding Ltd. has sparked a firestorm of public criticism, prompting Chief Executive Daniel Zhang to intervene in a situation that has stirred questions about sexual harassment in Chinese workplaces.

An 11-page account of the allegations by a female employee circulated on Alibaba’s internal discussion board Saturday night Beijing time and had become a subject of heated conversation among staff, according to company employees reached by The Wall Street Journal. Screenshots of the internal discussion later made their way to the broader Chinese internet, where they quickly went viral.

According to the woman’s account, the alleged perpetrator was a manager named Wang Chengwen—her supervisor at the time the alleged incident took place in late July. She wrote that Mr. Wang had brought her with him to a client event, where he pressured her to drink excessively. She awoke the next morning naked in a hotel room, she said, and dimly recalled crying the night before as Mr. Wang lay on top of her, kissing and groping her.

The woman didn’t reveal her identity in the account, although company employees said Alibaba staff who saw internal messages in which she alleged sexual assault would have been able to find out who she was.

Mr. Wang couldn’t be reached for comment.

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