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.
It’s been a minute since we’ve heard from Hempuli aka Arvi Teikari, the developer behind the adorably excellent push-puzzler Baba Is You. Well, Teikari is back with another game in the Baba-verse. This time, though, instead of pushing objects and altering the rules of reality, you are pushing tax papers in a short exercise of comedic relief. That’s right, the white little critter is doing their taxes in the aptly titled Baba Files Taxes.
Read More:Baba Is You Is A Brilliant Puzzle Game
This new game, available for free on itch.io (Windows only), tasks you with helping the smol cat-dog thing get their taxes completed. There’s just one problem, though: the deadline to file is tonight! You’d better rush to get Baba’s paperwork done while there’s still time. What does this look like in practice? Basically, you’re forging Baba’s signature on a bunch of legal documents, which I’m pretty sure is a criminal offense, but hey! The government doesn’t know what’s going on, and you better not tell them! Besides, Baba’s just a lil guy, and as the game informs you early on, reading and writing are not among Baba’s strong suits.
Icely Puzzles
Once you’ve filled out the papers filled with legalese as well as multiple-choice questions like “What are clouds made of?” and “What is emptiness?”, you’ll submit the papers to a purple blob person who asks a simple question: “What are taxes?” A waste of time, buddy. A total waste of time. You’ll also get graded for how well your signature matches Baba’s, which is hilariously ironic considering the creature doesn’t have actual hands. But I digress. In all, Baba Files Taxes will take you roughly 10-ish minutes to finish.
Though they’re not the same kind of game, Baba Files Taxes reminds me of Snoozy Kazoo’s Turnip Boy Commits Tax Evasion. Maybe it’s because both games have “tax” in their titles, which makes my hairs stand up as we steadily approach the tax-filing season. The annual act is such a nuisance on its own, often becoming something of an IRL puzzle. Maybe Baba can help me file my taxes now that I’ve helped them, but to be honest, I’m not holding my breath. If you’re looking for something short and charming to check out, though, Baba Files Taxes is a quick hit before the floodgates open.
U.S.-listed shares of Chinese internet stocks including Alibaba Group Holdings Ltd.
BABA,
-9.22%
were sinking Friday to cap off an eventful week that saw Chinese leaders reportedly acknowledge that the country could come up shy of its growth goals. The Wall Street Journal reported Thursday that the Chinese Politburo put out a statement asking stronger provinces to work to meet expansion targets, which was seen as a sign that country leaders may not currently expect other areas to hit their marks. Alibaba’s U.S.-listed shares were off 8.5% in Friday’s session and down 18.9% over the course of July. That would put the shares on track for their biggest monthly drop since November 2021, when they lost 22.7%, and the lowest monthly close since December 2016. The shares have also fallen 23.8% amid a three-week losing streak. Earlier this week, The Wall Street Journal reported that Alibaba cofounder Jack Ma was preparing to give up control of Ant Group Co., the financial-technology company that’s affiliated with Alibaba. Other U.S.-listed Chinese shares were falling as well Friday, including video platform iQiyi Inc.
IQ,
-8.25%,
down 7.5%.; video company Bilibili Inc.
BILI,
-4.80%,
down 4.6%, and e-commerce giant JD.com Inc.
JD,
-4.76%,
down 4.3%.
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
Pour one out for every kid who one-strapped a backpack in middle school, as they’re likely in mourning today. With Apple’s discontinuation of the 7th-generation iPod Touch, announced yesterday, it’s official: the iPod is dead.
Ostensibly, the iPod was a music device, meant to digitize song libraries and move listeners away from the limitations and galactically better sound quality of physical media. (Whether such a shift was good for the music industry is, of course, another story.) But over its many iterations, the iPod also heralded another revolution: that of mobile gaming.
Once upon a time, mobile gaming consisted of playing Brick or Snake on your parents’ dusty Nokia. And sure, following its 2001 launch, the iPod—which literally featured a shoddy port of Brick following the device’s 2001 launch—had a similar landscape for a while. Over the next few years, the offerings grew, but not by much. In 2006, EA released iPod versions of minted classics like Sudoku and Solitaire. Kaplan, the for-profit educational behemoth, released a series of SAT prep study courses (to which I can only say: lol). Compared to other mobile gaming devices of the era, like, say, the Nintendo DS, the iPod was hardly revolutionary.
Then came the iPod Touch.
First released in 2007, the iPod Touch totally reimagined the iPod’s design. Rather than a brick with a wonkily controlled track wheel, the iPod Touch looked a lot like its contemporary, the iPhone: sleek, rectangular, affixed with a glass touch screen that coated its entire silhouette. Unlike the iPhone, you couldn’t use an iPod Touch to summon and instantly lose the courage to dial up your crush from algebra. But if you had a Wifi connection, you could download a bunch of games that’d at least distract you during algebra.
And some of the games of the era were truly excellent. Fruit Ninja! Tap Tap Revenge! Words with Friends! Temple Run practically created, or at least widely popularized, a new genre, laying the groundwork for truly terrific endless runners like Alto’s Odyssey. Personally, I had a soft spot for Doodle Jump, a platformer that cast you as an elephant (?) wearing a jetpack. The visuals, stylized to look like a lined paper notebook, are inked in memory. But for me, at least, it was also an early introduction to the wider world of leaderboards.
Some games, quality aside, went on to become legit cultural behemoths. Angry Birds spawned a feature film, along with crossovers with Star Wars and Transformers, and a gazillion other spin-offs. (My grandmother once bought me an Angry Birds bath mat, presuming that, seeing as I like video games, I must like Angry Birds, the only video game.) The impact was undeniable.
Raise your hand if these ads left an indelible impact on you, too.
And so, news of the iPod’s death set off a spirited wave of nostalgia in Kotaku’s Slack this afternoon.
Staff editor Lisa Marie Segarra shouted out pretty much all of the games listed above, and further pointed to the iPod as a catalyst for the indisputable Candy Crush craze. She also praised the tilt controls that came with some games, which were “so innovative at the time. Or at least it felt like it.”
“What a time to be alive,” added staff writer Zack Zwiezen. “I truly miss the older era of the App Store. … No doubt we have great stuff today, but I can’t help but long for those simpler times when I drank fake beer and played with knock-off lightsaber apps.”
The times are indeed less simple. Rather than the handful of must-play options, Apple’s gaming ecosystem is bigger than ever, as major games—everything from blockbusters like XCOM and Genshin Impact to indie sleeper hits like Sayonara Wild Hearts and Baba is You—make their way to the App Store. Apple Arcade, a subscription service that grants access to a library of games, is slowly becoming an essential scouting ground for under-the-radar gems. (Many Apple Arcade games eventually make their way to Nintendo Switch or traditional consoles, where they become ‘legitimized’ in the eyes of the hardcore player, something that goes on to obscure mobile game origins.)
But every time one of these once-essential devices gasps its final breath, I find myself struck at the finality—how everything, no matter its apparent staying power or cultural impact, is ephemeral, a fleeting moment you don’t realize was fleeting until it’s gone. As they say: Wouldn’t it be nice to recognize you’re living in the good times when you’re actually living in the good times? I think so.
Anyway, yeah, RIP to the iPod. You had a good run. You’ve left a good legacy. And to really get all mid-2000s: Thnks fr th Mmrs.
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
Chinese- and Hong Kong-listed stocks soared on Wednesday after China’s government pledged to support beleaguered markets.
The Hang Seng
HSI,
+9.08%
surged 9% as state-run Xinhua News Agency said the government would take a number of market-friendly steps.
The Shanghai Composite
SHCOMP,
+3.48%
rose 3.5%.
China’s financial stability and development committee called for monetary policy to support the economy, and that authorities should prudently introduce policies that have a contractionary impact.
The Chinese government also is working with U.S. authorities to support listings overseas, as the Securities and Exchange Commission last week identified Chinese companies that could be delisted over the issue of auditor access.
JD.com
9618,
+35.64%
JD,
+7.08%
jumped 36%, Alibaba
9988,
+27.30%
BABA,
-1.29%
rallied 27% and NetEase
9999,
+23.40%
NTES,
+3.79%
surged 23% in Hong Kong trade.
Other Hong Kong tech stars also jumped, including Meituan
3690,
+32.08%
and Tencent Holdings
700,
+23.15%.
The committee also said it would keep Hong Kong’s financial markets stable while enhancing regulatory communications and coordination with Hong Kong regulators.
“Having disappointed markets earlier in the week by not cutting interest rates, China’s state economic policy apparatus is taking significant coordinated steps to support risk sentiment. These include State Council support for overseas listings, engaging with the U.S. on ADRs, and perhaps most importantly, suggesting that regulation of its big tech firms will end soon. There are also promises to step-up support for the real estate sector,” said Stephen Innes, managing partner at SPI Asset Management.
Even with Wednesday’s surge, the Hong Kong index is down 14% this year, compared to the 11% drop for the S&P 500
SPX,
+2.14%.
The remarks didn’t address another factor that’s been weighing on Chinese stocks, the possibility of sanctions from the U.S. if the country provides arms to Russia.
Signage at the Alibaba Group Holdings Ltd. headquarters in Hangzhou, China, on Wednesday, March 24, 2021.
Qilai Shen | Bloomberg | Getty Images
Lockdowns in China could be a boon for businesses like Alibaba, says Sam Le Cornu of Stonehorn Global Partners, who said his firm is buying more shares in the Chinese tech giant.
“We’re increasing our position in Alibaba,” Le Cornu, CEO and co-founder at the investment management firm, told CNBC’s “Street Signs Asia” on Thursday. “Based on valuations and the earnings outlook, we see that it’s a buying opportunity.”
As the pandemic stretches into its third year, China continues to press on in its strict zero-Covid strategy, with lockdowns being implemented in cities following the discovery of only a handful of infections. In late December, the major Chinese city of Xian went into lockdown despite having a confirmed Covid case count that is much lower than what other cities overseas have reported.
Such situations could benefit e-commerce platforms like Alibaba’s Taobao and Tmall, as consumers will still need to buy goods, but have limited opportunity to visit brick-and-motor stores, said Le Cornu.
“Take what happened last time when there [were] lockdowns, when it first originated in China — Tencent, Alibaba, JD, Pinduoduo all did well,” he said. “You look at Alibaba and I think it’s a great opportunity with those lockdowns.”
The investor also said he was “pretty impressed” with how Alibaba is navigating some of the macro headwinds.
In addition to concerns that a slowdown in consumer spending in China could affect sales for firms like Alibaba, China’s domestic tech sector has also come under heavy pressure amid a months-long regulatory scrutiny from Beijing.
Asia is lagging
Asia markets, in particular Hong Kong’s Hang Seng index, had a “tough year” in 2021, the CEO pointed out.
The city’s benchmark index tumbled around 14% in 2021, and was the worst performing market in Asia-Pacific.
“You’ve got the price-to-book in this market at 30-year lows or almost all-time lows and if you look at the composition of it, there’s a lot of … undervalued, oversold positions,” he explained. The price-to-book ratio compares a stock price to its book value, and is usually used to measure the value of a stock.
Read more about China from CNBC Pro
The broader Asian region also appears “relatively undervalued” at a time when major indexes in the U.S. are hitting all-time highs.
As a result, there might be a rotation away from the developed markets into emerging markets, Le Cornu said, pointing out that it comes as China appears to be in the middle of policy loosening, while the Federal Reserve suggests the start of a tightening cycle in the U.S.
U.S. markets tumbled on Wednesday following the release of the Fed’s December meeting minutes, which showed officials at the central bank ready to aggressively scale back policy help. The sell-off continued in Asia and Europe on Thursday, with tech stocks and cryptocurrencies falling sharply.
A previous version of this report incorrectly stated the dollar figure for Alibaba’s net income.
U.S.-listed shares of Alibaba Group Holding Ltd. are off 9.6% in morning trading Thursday after the Chinese e-commerce giant fell short of expectations with its latest financial results and reduced its full-year revenue outlook.
The shares are on track to post their largest single-day percentage decline since Dec. 24, 2020, when shares dropped 13.3%. They are also on pace for their second-worst percentage drop on record.
The company reported fiscal second-quarter net income of RMB5.4 billion ($833 million), or RMB1.97 per American depositary share, down from RMB28.8 billion, or RMB10.48 per ADS, in the year-earlier quarter. On an adjusted basis, Alibaba
9988,
-5.34%
BABA,
-11.12%
earned RMB11.20 per ADS, down from RMB17.97 per ADS a year prior and below the FactSet consensus, which called for RMB11.86 per ADS.
“This quarter, Alibaba continued to firmly invest into our three strategic pillars of domestic consumption, globalization, and cloud computing to establish solid foundations for our long-term goal of sustainable growth in the future,” Chief Executive Daniel Zhang said in a release.
Revenue increased to RMB200.7 billion from RMB155.1 billion, while analysts tracked by FactSet had been modeling RMB204.1 billion
Alibaba noted that it saw 1.24 billion annual active customers in the 12 months that ended Sept. 30. That marked a roughly 62 million increase from what the company recognized in the June quarter. Alibaba’s active-customer total consisted of 953 million customers in China and 285 million customers overseas.
The company said that it now expects to grow fiscal 2022 revenue by 20% to 23%. At the beginning of the fiscal year, Alibaba targeted over RMB930 billion in revenue, which would have marked an increase of at least 29.7% from its fiscal 2021 total.
The company disclosed in its earnings report that the outlook reflects its “current view of macroeconomic conditions and the competitive landscape.”
Chief Financial Officer Maggie Wu said in response to a question on the company’s earnings call that “if you look at our guidance and then try to derive the second-half growth,” that would imply “revenue growth at the teens.” She noted that growth in overall gross domestic product and consumption in China has slowed but also said that Alibaba has been diversifying its revenue streams to include greater contributions from areas like cloud computing and international markets.
Alibaba’s cloud business saw revenue increase 33% in the most recent quarter, outpacing the company’s overall 29% revenue growth.
U.S.-listed shares of fellow Chinese e-commerce company JD.com Inc.
JD,
+3.19%
are up 3% in morning trading Thursday after JD.com exceeded expectations with its own results.
Alibaba’s U.S.-listed shares are off 15.3% over the past three months as the S&P 500
SPX,
-0.26%
has risen 6.7% and as the KraneShares CSI China Internet ETF
KWEB,
-4.18%
has added 6.4%.
You wouldn’t expect a 97-year-old to necessarily have a lot of patience, but legendary investor Charlie Munger is doing just that with one of his holdings.
Munger’s Daily Journal
DJCO,
+2.17%
nearly doubled its stake in Chinese internet giant Alibaba Group Holding
BABA,
+8.26%
in the third quarter, a Securities and Exchange Commission filing released this week showed. (Holdings in Bank of America
BAC,
-0.27%,
Posco
PKX,
+1.37%,
US Bancorp
USB,
+0.70%
and Wells Fargo
WFC,
-0.23%
were unchanged.)
Munger, also the vice chairman of Berkshire Hathaway
BRK.B,
+0.97%,
now has about 18% of Daily Journal’s portfolio in Alibaba, at a basis of between $180 and $200 per share, says Tom Hayes, chairman and managing member of Great Hill Capital, who has also invested in Alibaba. Alibaba closed Thursday at $156.
Hayes says there are key lessons to be learned from Munger’s investment. “For starters, successful people do what unsuccessful people won’t. He’s willing to take some short-term pain for long-term gain. Not on the basis of wishing or hoping, but on the basis of facts and data,” says Hayes.
Granted, yes, Alibaba has been fined for monopolistic practices, and China has aggressively sought to tame its big businesses. There also are efforts afoot by the Securities and Exchange Commission to delist Chinese companies, though Hayes points out that Alibaba’s auditor is PwC, and he doesn’t believe Chinese listings with big four auditors will be removed.
Alibaba has been growing its top line, and cash flow is forecast to more than double in the next few years. You can now pay less for Alibaba than it was when the company was less than a third of its current size, says Hayes. And it will be tough to find one billion users elsewhere. “And that’s why Buffett and Munger are the best investors around,” Hayes said.
The chart
The spread between the yield on the 10-year Treasury note and the 3-month bill has the highest correlation to gross domestic product growth one year out, of any yield curve indicator. And, at the current spread, the economy will expand at 2.3% next year, a far cry from the 3.8% the Federal Reserve is projecting. “While the yield curve may not be able to give an exact estimate of future economic activity, it sure can give an indication about the general direction of growth. And right now, what the curve is saying is that growth will be way below where the consensus and the Fed expect it to be, thus leaving enough room for disappointment,” said David Rosenberg, chief economist and strategist at Rosenberg Research.
The buzz
The big event of the day is the Canadian jobs report. Nah, just kidding, it’s the U.S. nonfarm payrolls report, which is expected to show a 500,000 increase in jobs and the unemployment rate ticking down to 5.1%. Federal Reserve officials have set a low bar for this report to clear in order to initiate the bond taper program, with Chair Jerome Powell saying it only has to be “reasonably good.”
Strategists at Bank of America point out that 10 of the last 12 payrolls report have sparked risk-on behavior in markets.
U.S. stock futures
ES00,
+0.12%
NQ00,
+0.09%
were a touch higher ahead of the report, while the yield on the 10-year Treasury
TMUBMUSD10Y,
1.585%
edged up to 1.58%.
The Senate voted Thursday night to lift the debt ceiling by $480 billion, moving the legislation to the House, which is expected to do likewise.
Electric-car maker Tesla
TSLA,
+1.39%
announced it was moving its headquarters to Texas from California.
Oshkosh
OSK,
+1.16%
warned that supply-chain and logistics disruptions were hurting its ability to make and ship units, as it lowered guidance for its fiscal fourth quarter.
The 2021 Nobel Peace Prize was awarded to journalists Maria Ressa of the Philippines and Dmitry Muratov of Russia for their fight for freedom of expression.
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Walmart’s
WMT,
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Sam’s Club is offering bigger turkeys this year. Here’s why.
A six-year-old is Georgia’s youngest certified farmer.
A remote stun gun-style device is being used — to quiet dancing grannies in China.
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