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Deal
Alibaba Group Holding Ltd said on Sunday its board authorized an increase in the company’s share buyback program to $ 10 billion from $ 6 billion.
FILE PHOTO: The Alibaba Group logo is seen during the company’s 11/11 Singles Day global shopping festival at its headquarters in Hangzhou, Zhejiang Province, China on November 11, 2020. REUTERS / Aly Song
BEIJING / HONG KONG: Alibaba shares fell 9 percent to their lowest level since June on Monday, as the firm’s $ 10 billion buyback program failed to ease concerns about a regulatory crackdown on it. e-commerce and the financial empire of co-founder Jack Ma.
A strong two-session sell-off has wiped out nearly $ 116 billion of the tech giant’s Hong Kong-listed shares.
The downward spiral intensified when Chinese regulators on Thursday announced the launch of an antitrust investigation into Alibaba and said they would convene its subsidiary Ant Group to meet. Alibaba’s US shares plunged more than 15% on the day.
“The antitrust investigation on Alibaba has yet to specify the sanctions, which is of great concern to investors,” said Zhang Zihua, investment director at Beijing Yunyi Asset, adding that the outcome of the investigation could “greatly change” the company valuations.
Making investors more nervous was the news over the weekend that the Chinese central bank had asked Ant to reorganize its loan and other consumer finance operations.
These developments are part of a crackdown on monopolistic behavior in China’s booming internet space in general, but Ma’s business empire in particular after he publicly criticized the regulatory system for stifling innovation.
Last month, Chinese regulators abruptly suspended Ant’s successful $ 37 billion initial public offering in Shanghai and Hong Kong, which was on track to be the world’s largest, just two days before its planned debut.
“The new regulations are hurting the big internet platforms, so you see that Tencent and other tech companies are also seeing their share prices fall,” said Li Chengdong, a Beijing tech analyst.
“Alibaba is now the target of regulators, so the backlash is stronger.”
Regulators have warned Alibaba about the “pick one of two” practice whereby merchants are forced to sign exclusive cooperative pacts that prevent them from offering products on rival platforms.
The State Administration for Market Regulation said Thursday it had launched an investigation into the practice.
Sadness over the regulatory crackdown overshadowed Alibaba’s decision, announced Sunday, to increase its share buyback program to $ 10 billion from $ 6 billion, effective for a two-year period through the end of 2022.
Alibaba shares could trade lower in the short term due to “regulatory glut,” Nomura said in a note Monday.
But the cheaper security will be attractive to long-term investors, Nomura added, as it maintained a “buy” rating on US-listed Alibaba stocks and maintained a price target of $ 361. The stock closed at $ 222 on Thursday.
(US $ 1 = 7.7521 Hong Kong dollars)
(Information from Kanishka Singh in Bengaluru, Yilei Sun and Cheng Leng in Beijing, and Julie Zhu and Pei Li in Hong Kong; written by Sumeet Chatterjee; edited by Christian Schmollinger and Himani Sarkar)
