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Tag Archives: Alibabas
A Chinese man surnamed “Ma” was detained. The news wiped $26 billion off Alibaba’s stock
Alibaba, the Chinese e-commerce giant Ma co-founded, saw its Hong Kong-listed shares plunge as much as 9.4% Tuesday after Chinese state media reported that an individual surnamed “Ma” in the city of Hangzhou — where Alibaba is based — had been detained on national security grounds.
According to China’s state broadcaster CCTV, the suspect was placed under “compulsory measures” on April 25 on suspicion of “colluding with overseas anti-China hostile forces” to “incite secession” and “incite subversion of state power.”
The one-sentence report, which was swiftly picked up by other state media outlets and alerted across Chinese news platforms, triggered panic selling in Hong Kong, erasing an estimated $26 billion from Alibaba’s market value within minutes.
Amid the frenzy, Hu Xijin, the former editor-in-chief of the state-owned nationalist tabloid the Global Times, rushed to clarify on China’s Twitter-like Weibo that the report was misleading because the name of the suspect in question has three characters. Jack Ma’s Chinese name, Ma Yun, has only two characters. (CCTV later quietly updated its original report to match Hu’s assessment).
To further dispel concerns, the Global Times reported the accused man was born in 1985 in Wenzhou (while Jack Ma was born in 1964 in Hangzhou) and worked as the director of hardware research and development at an IT company.
The clarifications led to a rebound, with Alibaba recovering the majority of its losses by the day’s end.
The market’s roller coaster reaction is the latest sign of just how skittish investors are getting over China’s embattled tech sector, which has been a target of the Chinese government’s heavy-handed regulatory crackdown since late 2020.
Despite recent signals from the Chinese government it is preparing to rollback the campaign due to the economic impact, as first reported by the Wall Street Journal, the market frenzy on Tuesday indicates investor confidence remains shaky.
“I thought this was kind of an odd episode,” said Victor Shih, a political science professor at the University of California San Diego. “Whether that was a warning of sorts to the technology sector as a whole, or perhaps Jack Ma personally. Who knows? But it’s certainly demonstrated the government does not even have to arrest a senior technology executive to erase tens of billions of dollars from a company’s market valuation. It just needs to release some kind of information,” Shih added.
“That’s quite powerful. And certainly what happened yesterday was a clear illustration of that power, whether it was delivered or not.”
But the fact investors were so quick to believe Jack Ma, once China’s most high-profile billionaire, would fall afoul of state security authorities reveals something of the political reality many Chinese tycoons now live in.
“It doesn’t really matter anymore if it’s really him. The important thing is: a lot of people think it’s him, a lot of people expect it to be him, now that is interesting,” said a popular comment on Weibo, which drew 57,000 likes.
The turn in public sentiment against Ma is almost as spectacular as his rags to riches story. Until about three years ago, the English teacher-turned billionaire was widely worshiped for his charisma, outspokenness and self-made success. (He was even nicknamed “Daddy Ma” by some fans).
But as tech companies like Alibaba expanded their businesses empires, they’ve become the target of growing frustration and resentment among young Chinese workers who are fed up with gruelingly long work hours, high pressure and stagnant pay. (Jack Ma’s endorsement of China’s so-called “996” work culture, meaning working from 9 a.m. to 9 p.m. six days a week, drew intense criticism in 2019.)
As tech giants fell under the crosshairs of the Chinese government, “evil capitalists” have been increasingly blamed for various social ills, from relentless competition, skyrocketing property prices to lack of social mobility.
“Within just a few years, ‘Daddy Ma’ has been labeled as a ‘rotten capitalist’ in public opinion, and many people are looking forward to Ma’s downfall,” Xiang Dongliang, a blogger, wrote on WeChat.
“But the question is, will bringing down capitalists and driving out (so-called) foreign forces really make everyone’s life better?”
Jack Ma has mostly faded from public life and kept a low profile since Ant Group’s IPO in the US was halted by regulators in late 2020. Once among the most outspoken figures in China, he hasn’t posted anything on Weibo, where he has nearly 25 million followers, since October 2020.
His last Weibo post, about a meeting with some 100 school principals to discuss the future of China’s education, was flooded with critical comments.
“I won’t be surprised if old Ma is jailed one day,” the top comment said. “You’re just a capitalist! Don’t pretend to be a good person!” another comment screamed.
Jack Ma remained silent throughout Tuesday, as rumors against him swirled on the Chinese internet. Hashtags about the detention of the suspect surnamed Ma were among the top trending topics on Weibo, drawing hundreds of millions of views.
“He has only silence, which is a ‘special way of existing’,” Zhang Feng, a columnist, wrote in a widely shared WeChat article following the incident.
“This kind of silence is of profound significance. For a public figure, his speech itself is an ‘extension’ of his existence. When a person no longer speaks up, although he is still alive, still doing things, at least part of him has ‘vanished’.”
Alibaba’s shares fall after unconfirmed rumors link Jack Ma to a probe
Alibaba headquarters in Hangzhou, China.
Bloomberg | Bloomberg | Getty Images
Alibaba’s Hong Kong-listed shares were about 1% lower Tuesday — after earlier falling more than 9% —following unconfirmed rumors that linked the company’s founder Jack Ma to a national security investigation.
Chinese state media reported earlier in the morning that the Hangzhou security bureau on April 25 took “criminal coercive measures” on an individual with the last name Ma over suspicion of using the internet to endanger national security.
CNBC was unable to confirm the Chinese report. Alibaba and the Jack Ma Foundation did not immediately respond to a request for comment.
Subsequent state media updates indicated the person had a first name with two Chinese characters, rather than one. Jack Ma’s first name in Chinese only has one character.
Such “coercive measures” can include detention, arrest or bail. The security bureau is also investigating the case, state media said.
Jack Ma stepped down from Alibaba’s board in 2020 and no longer has executive responsibilities, the company said in a July 2021 statement.
Chinese state newspaper blasts ‘worship of turnover’ after Alibaba’s Singles Day
People walk along a main shopping area during the Alibaba’s Singles’ Day shopping festival in Shanghai, China November 11, 2021. REUTERS/Aly Song
SHANGHAI, Nov 12 (Reuters) – The focus of China’s Singles’ Day shopping festival should shift from a “traffic and sales war” to one of science and technology, a state-backed newspaper said on Friday, describing the “worship of turnover” as incompatible with China’s new development path.
The article in the Securities Daily comes a day after the annual shopping blitz spearheaded by Alibaba Group (9988.HK), which recorded 540.3 billion yuan in orders over the 11-day event.
The newspaper said the event had achieved many years of record breaking sales, but had also given rise to practices such as spam text messaging of users, unfair competition and merchants faking discounts. The model had become one in which it was hard to achieve “breakthrough innovations”, the paper said.
By using low prices as a selling point, platforms and merchants were stimulating “low-level” consumption, which was in not in line with China’s goals to achieve high-quality development, it added.
“The ‘worship of turnover’ is not only unsustainable in terms of digital growth but is also inextricably linked to chaos,” the newspaper said.
It said that it hoped to see Singles’ Day become a festival for platforms and businesses to showcase innovative achievements, and eventually even higher pursuits.
“I hope that one day, China’s Internet giants will no longer focus on the business of mom-and-pop shops, but will be able to walk towards space in their own private rocket,” the article’s writer said, pointing to Amazon founder Jeff Bezos’ and Tesla founder Elon Musk’s rocket projects as examples.
Alibaba and JD.com did not immediately respond to a request for comment.
Alibaba turned China’s informal Singles’ Day into a shopping event in 2009 and built it into the world’s biggest online sales fest, dwarfing Cyber Monday in the United States.
It toned down the marketing hype this year amid regulatory scrutiny, doing away with a rolling tally tracking transactions that had taken centre stage in previous years and said it was focused on sustainability.
Rival JD.com (9618.HK), which also holds its own Singles Day shopping event, similarly did not publish real-time sales data.
($1 = 6.3898 Chinese yuan renminbi)
Reporting by Brenda Goh. Editing by Gerry Doyle
Our Standards: The Thomson Reuters Trust Principles.
11.11 Sales: Alibaba’s Singles Day strikes a muted tone this year as China’s economy slows and a tech crackdown continues
But the tone at this year’s bonanza is a lot more cautious than it has been in prior years, as companies contend with rising inflation in a slowing economy and a regulatory crackdown on their operations.
Alibaba (BABA) launched the first Singles Day Shopping Festival on November 11, 2009. The event, which is also known as Double 11, is pegged to China’s informal, anti-Valentine’s Day holiday that celebrates people who aren’t in relationships. The date — 11.11 — was chosen because it is written as four ones, or singles.
Since that first occurrence, Singles Day has ballooned into a shopping frenzy observed not just by Alibaba, but also by other e-commerce companies that offer their own steep discounts and promotions. Deals take place over several days or even weeks. It has also spread outside of China, with Alibaba’s Southeast Asia subsidiary Lazada offering deals in Singapore, Malaysia, Indonesia, Thailand and Vietnam.
It’s an incredibly lucrative event: Last year, Alibaba raked in roughly $75 billion in total sales. Rival JD.com (JD) said at the time that it reached $41 billion in sales.
An inflation headache
Alibaba and JD.com may still reach new sales records this year. Analysts at Citi recently forecast Alibaba’s total gross merchandise volume (GMV) to reach as much as 578 billion yuan ($90 billion) through the first 11 days of November, a 15% increase compared to last year.
But that rate of growth would be a lot slower than in years last. Last year, Alibaba posted a 26% jump by that metric compared to a year earlier. The Citi analysts also expect JD.com’s GMV growth for the shopping period to slow to 22% to 26%, compared with last year’s 33%.
While the Citi analysts wrote in a recent report that promotional campaigns have “kicked off with strong consumer demand,” they added that they are “cautious” that overall sentiment could be hurt by a “weaken[ing] underlying economy.”
China’s economy is growing at the slowest pace in a year as energy woes, shipping disruptions and a deepening property crisis take their toll on the world’s second largest economy.
Inflation, meanwhile, has risen, which threatens to erode profit margins and the purchasing power held by consumers.
The cost of goods leaving China’s factories surged by another record rate last month — China’s Producer Price Index jumped 13.5% in October from a year ago — and there are now signs that the higher costs are trickling down. China’s Consumer Price Index rose 1.5% in October from a year ago, double the rate of the previous month and the fastest pace of increase since September 2020.
“On the one hand, the soaring input costs have significantly squeezed the profit margin for downstream manufacturers, which in turn limits the space to offer a large discount this year,” said Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis, a French investment bank. “On the other, domestic consumption is not yet back to pre-pandemic level[s] and even online retail sales, which remained relatively resilient in 2020, have decelerated.”
Crackdown woes
This year’s shopping event is also being held under the shadow of a sweeping government crackdown over private business.
E-commerce firms have not escaped that scrutiny, and in many ways have been at the center of it. Alibaba was hit earlier this year with a record $2.8 billion fine for behaving like a monopoly, and the company has shed hundreds of billions of dollars in market value as Beijing’s reforms take shape.
JD.com, Tencent, Pinduoduo, Meituan and other companies have also been investigated or fined over alleged anti-competitive behavior.
A lot of companies have also rushed to donate billions of dollars from their own profits to government-based social causes, as President Xi Jinping makes clear his priority to redistribute wealth and achieve “common prosperity.”
Alibaba has pledged to donate 100 billion yuan ($15.6 billion) by 2025 in support of Beijing’s “common prosperity” campaign. Pinduoduo said in August it would give its entire profit for the June quarter to rural development projects in China, and expected to donate a total of 10 billion yuan ($1.5 billion) toward such causes. JD.com unveiled a plan late last year to “revitalize rural China” using money and its logistics infrastructure.
Singles Day has entered Beijing’s sights. On Saturday, the State Administration of Market Regulation — the country’s anti-trust regulator — banned e-commerce platforms from participating in unfair practices during the holiday shopping period, such as “raising prices of items before putting them on sale.”
Last week, the Ministry of Industry and Information Technology, which overseas the internet industry, summoned Alibaba, JD.com, Pinduoduo and Meituan and warned them against spamming consumers with marketing messages during Singles Day.
“The big internet platforms appear to be more cautious in marketing and promotions this year to refrain from breaching the antitrust regulations,” said García Herrero from Natixis.
Supporting Beijing
Companies are also rushing to support government initiatives intended to boost social equality or to reduce carbon emissions — both among Xi’s top policy goals. Climate has been a particular focus, with China this week even pledging to ramp up its climate ambitions in an agreement with the United States. (China, though, is still the world’s biggest coal consumer and earlier did not sign on to a statement at COP26 committing to phasing out the use of coal.)
Alibaba said they would shift focus from pure sales figures — usually each year’s headline — to sustainability and inclusiveness.
“This year’s Festival marks a new chapter for 11.11,” said Chris Tung, chief marketing officer of Alibaba Group, in a statement. “We believe we must leverage the power of 11.11 to encourage sustainable development and promote inclusiveness to consumers, merchants, and partners across our ecosystem.”
The company said it will showcase energy-efficient products on its services and give out 100 million yuan ($15.6 million) worth of “green” vouchers meant to encourage people to buy more sustainable products. It also wants to reduce the event’s carbon footprint by recycling the packaging it uses.
The company also said it wants to support “vulnerable populations,” and its Taobao app has introduced a “senior mode” option. The new feature is designed to be more accessible for the elderly with an updated interface and voice-assisted technology.
JD.com also announced this year’s Singles Day will be “the largest one where renewable energy is used, and one where [JD.com] will push for a reduced carbon footprint.”
Alibaba’s Joe Tsai gets to party but China punishes Jack Ma
Nobody knew until last month that Joseph Chung-Hsin Tsai — better known as Joe Tsai — was the “mystery buyer” who dropped $157 million this spring on two massive condos at 220 Central Park South, the most expensive apartment building in the country.
So far, keeping a relatively low profile and understanding international office politics has worked out well for Tsai, said to be worth at least $12 billion. The 57-year-old is the co-founder of Alibaba (China’s version of Amazon), the owner of the Brooklyn Nets and a friend of the Chinese Communist Party.
The same can’t be said for Jack Ma, his flamboyant onetime partner and the creative genius behind Alibaba. Ma has barely been seen in public for the past 10 months. His wings have been clipped, possibly permanently, by officials after Ma publicly dissed his country’s banking system last fall. He is reportedly being “re-educated” by the Chinese Communist Party.
“Tsai is savvy — savvier than Jack Ma,” Peter Navarro, author of “Death By China: Confronting the Dragon,” told The Post.
“In America you get canceled for saying the wrong thing. In China you get canceled for becoming a bigger celebrity than [President] Xi Jinping. Tsai realized that; Jack Ma did not,” Navarro said.
Tsai, who was born in Taiwan and educated in the US with citizenship in Hong Kong and Canada, is currently gallivanting around the world. He splits his time between a luxe home in Hong Kong, an oceanfront estate in La Jolla, Calif., and the new digs on Billionaires’ Row.
In addition to the Nets, Tsai and his wife, Kansas-born Clara Wu Tsai, co-own the WNBA’s New York Liberty, the San Diego Seals lacrosse team and the Barclays Center, where the Nets play their home games.
“Tsai is reducing his China risk when he buys the Nets and Central Park South. It’s a smart thing to do,” Gordon Chang, author of “The Coming Collapse of China,” told The Post. “Xi is going after Chinese tech companies like never before and no one knows how it’s going to end up.”
Meanwhile, Ma is thought to be under what amounts to house arrest in China, according to experts.
“He’s lying low right now. I talk to him every day,” Tsai told CNBC in June. “He’s actually doing very, very well. He’s taken up painting as a hobby.”
Ma built Alibaba into a $500 billion powerhouse and turned himself into the kind of iconic frontman more common among American and UK billionaires. At one point, his face was reportedly more recognizable in China and around the world than Xi’s.
Ma hung out with movie stars like Tom Cruise and Daniel Craig and top politicians all over the world, and became known for his wild performances — dressing as Michael Jackson or Elton John — at Alibaba functions.
His high life came to a halt when he gave a now-infamous speech at a 2020 conference, calling out China’s state-owned banks and regulators for being backward. Among other things, Ma slammed their “pawnshop mentality.”
“Today’s financial system is the legacy of the Industrial Age,” Ma said. “We must set up a new one for the next generation and young people.”
His remarks came days before Ma’s financial tech firm Ant Group was readying what would have been the world’s biggest IPO. In response, Beijing pulled the plug on the deal and since then has relentlessly gone after Ma’s massive empire, reducing it by half — levying antitrust fines against Alibaba and almost eviscerating Ant by dividing it up with new partners.
The less colorful Tsai, on the other hand, has never been more successful.
It hasn’t hurt that he seems to know which masters to bow to. Last October, Tsai responded to a tweet from Houston Rockets general manager Daryl Morey supporting protesters in Hong Kong fighting the increasing overreach of the mainland.
While flying private from New York to Shanghai for a Nets game, Tsai wrote an astonishing “letter to NBA fans” that he posted on Facebook. In it, he referred to the Hong Kong protests as a “separatist movement.”
“The one thing that is terribly misunderstood, and often ignored, by the Western press and those critical of China is that 1.4 billion Chinese citizens stand united when it comes to the territorial integrity of China and the country’s sovereignty over her homeland,” he wrote. “This issue is non-negotiable.”
From a business perspective, Tsai was correct in trying to do damage control. Sources told ESPN that the NBA lost between $150 million and $200 million in revenue when Chinese officials yanked sponsorships and airtime after the Morey tweet.
But the irony in Tsai’s defense of China and, by extension, the Chinese Communist Party, is that he comes from a family who fled it.
Tsai’s paternal grandfather, an adviser to the nationalist Kuomintang (KMT) government, left Shanghai for Taiwan in 1948 with his family. They were part of a mass exodus after the Communists won the civil war.
At 13, Tsai was sent from his home in Taipei to boarding school in Lawrenceville, NJ. He then went on to graduate from Yale University and Yale Law School. His parents were reportedly made naturalized citizens of Canada in the 1970s, according to a source, which is apparently why Tsai has Canadian citizenship. But seemingly, none of the family ever lived in Canada.
Tsai is based in Hong Kong and visits his wife and three kids — all American citizens — in the US often, a source familiar with the situation told The Post.
He and Clara met in 1993 when Tsai worked at the Sullivan & Cromwell law firm and she was a senior manager and vice-president at American Express. They married in 1996.
“My first job after law school was in New York. I met my wife, Clara, here so New York to me is my second home,” Tsai told The Post in 2019.
By 1999 the couple had moved to Hong Kong, where Tsai was a $700,000-per-year principal at a private equity firm. That year, a friend introduced him to Ma — a former English teacher with a big idea about getting hundreds of Chinese companies online so they could sell their wares to the world.
As the story goes, Tsai was so impressed with Ma’s vision that he was ready to leave his job. But the feeling wasn’t immediately mutual. Tsai reportedly had to return more than once to meet with Ma but it wasn’t until he brought Clara that Tsai clinched the deal. By several accounts she is his best asset.
Clara has a bachelor’s degree in international relations and a master’s degree in international policy studies from Stanford as well as an MBA from Harvard.
“Joe Tsai’s smart, but his wife is always the smartest person in the room,” someone who has worked with them told The Post. “She seems to have an innate ability to be able to read landscapes well and really understand events. She comes across like a futurist.”
Clara has worked on her pet cause, prison reform, with Kim Kardashian. She and Tsai have donated hundreds of millions of dollars to charities and universities in recent years. They made gifts to Stanford ($250 million) and Yale (reportedly $800 million) under the rubric of “neuroscience” — which involves futuristic brain technology and is a favored investment of billionaires including Elon Musk and Google’s Ray Kurzweil.
But for all Tsai’s philanthropy, some think he is a traitor to his people.
Many supporters of Hong Kong protesters, including now-jailed Jimmy Lai, publisher of the now-shuttered Apple Daily, are disappointed by Tsai’s defense of the Chinese Communist Party’s heavy-handed influence over Hong Kong.
“If Joe Tsai would sell HK, he’d sell Taiwan, despite the island sheltering his family from potential death 70 years ago,” Catie Lilly, a Taiwanese-American historian, tweeted in 2019.
Which is another way of saying, according to some experts, that Tsai knows which way the wind is blowing and knows how to harness it.
“Tsai, frankly, is a whole lot shrewder than Ma,” Craig Singleton, a China expert at the Foundation for Defense of Democracies, told The Post.
“Tsai is unabashedly supportive of the Chinese Communist Party’s policies, including its recent security crackdown in Hong Kong,” Singleton added. “Having benefited from a close working relationship with the ruling party, Tsai understands the importance of going along to get along.”
Additional reporting by Brian Lewis
Alibaba (BABA), Baidu SP (BIDU), International Business Machines Corp. (IBM) – Alibaba’s Ant Leads The Way Globally In Blockchain Patents
Ant Group, the financial technology affiliate of e-commerce giant Alibaba Group Holding Limited (NYSE:BABA) retained its spot as the largest holder of blockchain patents in 2020, according to a report by International Asset Management that cited data from Clarivate’s Derwent World Patents Index or DWPI.
What Happened: Research published by IAM showed that Ant Group retained its top spot on the index, which aggregates patents filed for both quantity and quality, CoinDesk first reported. The rankings are dominated by Chinese companies, which lead the way in terms of blockchain patent filing volume.
Ant Group filed 586 patents in 2020, which represents a 33% decrease from the 880 patents it filed in the previous year. The company has 2,298 blockchain patents.
Shenzen-based conglomerate Ping An Insurance (Group) Company of China Ltd. (OTC:PNGAY) filed 1,215 patents in 2020 to wrest the second spot from Tencent Holdings Limited (OTC:TCEHY).
International Business Machines Corporation (NYSE:IBM) was the only non-Chinese company in the top ten, taking the fourth spot in the number of blockchain patents last year with 647 filings. Nevertheless, the DWPI score metrics pushed IBM into the second spot behind Ant Group.
Why It Matters: Chinese companies are continuing to expand their research into blockchain technology, which is used in financial technology, supply chain management and the Internet of Things or IoT, among other applications.
Chinese President Xi Jinping had called for more research and innovation in blockchain technology in 2019. Some of the biggest technology companies in China, including Ant Group, Tencent and Baidu Inc. (NASDAQ:BIDU) have representation in the country’s national blockchain committee.
See Also: Jack Ma’s Ant Pledges To Go Carbon Neutral By 2030
Since 2015, Ant Group has been investing significantly in the research and development of blockchain technologies. In July last year, Ant Group unveiled AntChain, a new technology brand for the company’s blockchain-based solutions.
Price Action: Alibaba Group shares closed almost 0.7% lower on Monday at $230.28 and further declined 0.2% in the after-hours session.
Read Next: NFT Sneakers That Don’t Yet Exist Fetched $3.1M In Just Seven Minutes
© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights
reserved.
Alibaba’s $38 Billion Bond Sale Shows Jack Ma Fans Still Believe
(Bloomberg) — Alibaba Group Holding Ltd. drew robust orders for a $5 billion bond sale, demonstrating investor confidence in the e-commerce giant’s long-term prospects amid easing tensions with Chinese regulators.
The four-tranche offer received more than $38 billion in orders at the peak, according to people with knowledge of the matter. The notes comprising 10-year, 20-year, 30-year and 40-year maturities were priced at 30 basis points to 40 basis points lower than initial guidance, as measured in yields above comparable Treasuries, said the people, who aren’t authorized to speak publicly.
The new dollar debt sale is the biggest in Asia since a $6 billion issuance by rival Tencent Holdings Ltd. in May. It comes amid growing expectations that Jack Ma’s tech empire may have avoided the worst-case scenarios — which had ranged from a government-led takeover to a break-up of his companies — after the billionaire entrepreneur briefly returned to public sight last month and as Ant Group Co. began its lengthy overhaul process. Washington’s decision to drop deliberations of an investment ban on the firm and Alibaba’s consensus-beating quarterly sales performance also helped ease concerns about its future amid a regulatory crackdown.
“Alibaba bonds have been well received in the market, with pricing having tightened significantly from its initial guidance. Approval of Ant’s restructuring plan has reduced uncertainty over the regulatory environment, which contributed to greater appetite for Alibaba’s new issuance,” said Chang Wei Liang, a macro strategist at DBS Bank Ltd. in Singapore.
Alibaba’s existing dollar notes and its shares rose Thursday after Bloomberg News reported that affiliate Ant Group and Chinese regulators agreed on a restructuring plan that will turn Jack Ma’s fintech giant into a financial holding company. While this would make Ant subject to capital requirements similar to those for banks, analysts say the agreement suggests it’s now less likely to have to spin off portions of its businesses. Meanwhile, Reuters reported that Ant may hive off its consumer data operations, a concession to regulators that may enable the company to revive plans for an initial public offering that had been abruptly halted in November.
Alibaba owns roughly a third of of Ant and Chief Executive Officer Daniel Zhang told analysts on Tuesday that the company was unable to assess the impact of the company’s ongoing restructuring on its business, though he added that only “a very small percentage” of Ant’s credit plans are used to make payments on its market places. The online retailer, which is facing its own antitrust investigation, has set up a special taskforce to conduct internal reviews and is actively communicating with antitrust regulators on complying with their requirements, Zhang said.
The company on Tuesday reported a stronger-than-expected 37% increase in quarterly sales, adding that it plans to continue investing for long-term growth in areas like cloud and artificial intelligence. “Alibaba has multiple growth drivers in the years ahead,” Jefferies analyst Thomas Chong wrote in a note after the earnings.
Alibaba was originally aiming to raise at least $5 billion via a debt sale that could’ve been increased to $8 billion depending on the reception, Bloomberg reported in early January. Investors had wondered then whether the company could pull off the deal as founder Ma hadn’t been seen in public since his Internet empire was hit with growing antitrust scrutiny. He’s since made an appearance in a live-streamed video chat.
The firm raised cash partly for general corporate purposes, including working capital needs, repayment of offshore debt, and potential acquisitions of or investments in complementary businesses, according to the people familiar with the deal. The 20-year tranche of Alibaba’s new offering is its first sustainability bond.
Alibaba’s dollar bonds have enjoyed a strong rebound since a selloff in China’s offshore investment grade notes at the beginning of the year. Spreads on the firm’s 3.4% note due 2027 were indicated at about 78.7 basis points over Treasuries on Thursday, some 57 basis points tighter than its January high, the latest Bloomberg-compiled data show.
(Updates with chart and bond levels in last paragraph)
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Jack Ma tension with Beijing casts shadow over Alibaba’s future
HANGZHOU, CHINA – NOVEMBER 13: Alibaba founder Jack Ma attends the 5th World Zhejiang Entrepreneurs Convention at Hangzhou International Expo Centre on November 13, 2019 in Hangzhou, Zhejiang Province of China.
VCG | Getty Images
GUANGZHOU, China — Jack Ma, Alibaba’s high-profile founder appears to be on the wrong side of the Chinese government, sparking a chain of events that has upped regulatory scrutiny on the e-commerce giant and cast uncertainty over its future.
Even after Alibaba reported December-quarter earnings above expectations, analysts and experts have warned that Ma’s friction with Beijing could hurt growth.
“Investors are looking at Alibaba with a much more careful eye after having been attracted by the growth story and the founder’s global profile,” Rebecca Fannin, author of “Tech Titans of China,” told CNBC by email.
“The current frictions are a new reality for investors who may not have carefully considered how the company’s rise as a powerful tech titan could be a threat to the status quo.”
It began in October when Ma made some negative comments about Chinese financial regulators just days ahead of the initial public offering (IPO) of Ant Group in Shanghai and Hong Kong, which would have been the world’s biggest. Ma also founded Ant Group and Alibaba owns about a third of the company.
There are two major concerns now. First, that Ant Group could be forced to restructure and even scale back some of its businesses like lending which has driven its growth. Such moves could seriously slash its valuation. The second concern is whether regulators might force Alibaba to break up or change parts of it core commerce business, which is its biggest profit driver.
“For now the greatest risk seems to be around investors’ confidence in the Alibaba brand and ecosystem,” Neil Campling, head of tech, media and telecom research at Mirabaud Securities, told CNBC by email.
“But if there is tighter regulation for the core drivers of the Alibaba platform then it could certainly stunt the growth of Alibaba. After all innovation and intricate weaving of the different aspects of the ecosystem combine to bring economies of scale and growth.”
Campling has a long-term buy rating on Alibaba’s stock.
Just ‘noise’ for long-term investors
Fannin believes Ma’s friction with Beijing will “ease up” but it will take some “agility on Alibaba’s part to deal with government pressure, changing consumer needs in a digital economy, and investor concerns.”
Alibaba’s U.S.-listed stock has been under pressure since the Ant Group IPO was pulled, falling from a record closing high of $317.14 on Oct. 27 to $254.50 at the close on Tuesday, a nearly 20% drop.
But some analysts and investors remain bullish.
Mizuho increased its price target on the stock from $270 to $285 on Tuesday saying the “stock (is attractive with the regulatory overhang mostly priced in.”
Matthew Schopfer, head of research at Infusive, an asset manager which is invested in Alibaba, said that the recent concern around the tech giant “will prove to be noise for the long-term investor.”
“Alibaba is a leading example of China’s technological capabilities and we do not expect the government to permanently damage the business. Additionally, heightened regulation will only further entrench the scale players like Alibaba,” Schopfer told CNBC by email.
“When we get to the other side of these regulatory headwinds, we think the market will again focus on Alibaba and its platforms as a critical part of the Chinese consumer’s everyday life and a major beneficiary from growth in Chinese spending power and the increasing digitalization of consumption.”