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.”



Source link

Random Posts

  • Save On Thousands Of Clearance Gadgets

    The development in technology has certainly had a major impact on the lives of many. Recent developments nevertheless present that China has began manufacturing and selling “waterproof touch-display cellphones” pegged at a price that is far cheaper than these manufactured […]

  • 17 Smartphone Devices That Will Make Your Life So Much Easier

    The indispensable communication gadgets, evaluate mobile phone deals advanced communication options in compact devices. These most preferred gadgets are an ideal combination of gorgeous designs and attractive types. Actually, cell phones have eradicated the usage of single objects. Earlier, mobile […]

  • Mix Flop

    The important communication devices, cellphones have reworked our approach of communication. The ability to maximize consumer on-line advertising and marketing strategies derives from our collective expertise rooted deeply in traditional advertising and marketing, media, and direct response. This expertise delivers […]

  • Latest Mobile Telephones

    Computer know-how combines the hardware of computers and laptop-managed devices with software program—operating techniques, authoring tools, expert systems, and courseware—to support training expertise. The world’s most-awarded cellular lens, olloclip is likely one of the cool gadgets for telephone use. It […]