Alibaba market cap sinks by half in a year since Ant IPO shelved

The logo of Alibaba Group is seen during Alibaba Group's 11.11 Singles' Day global shopping festival at the company's headquarters in Hangzhou, Zhejiang province, China, November 10, 2019. REUTERS/Aly Song

Alibaba Group Holding has lost more than half its market value in the year since finance arm Ant Group’s listing was postponed under pressure from Chinese regulators, sapping the momentum of China’s top e-commerce company.

Alibaba’s market capitalization topped out at 6.6 trillion Hong Kong dollars ($846 billion at current rates) at the end of October 2020 but has since slumped to about HK$2.8 trillion, or $358 billion. The company is also listed on the New York Stock Exchange.

Ant Group’s valuation has sunk below $200 billion from over $300 billion a year ago, according to one estimate.

An earnings call this month illustrates the bearish turn. CEO Daniel Zhang and other executives were peppered with tough questions from analysts about last quarter’s lackluster results. Asked when new operations are likely to turn a profit and whether weak group profit owed to macroeconomic factors, management gave few clear-cut answers.

Chief Financial Officer Maggie Wu provided perhaps the biggest surprise, saying revenue growth is projected to slow to 11%-16% in the second half of this fiscal year, down from 41% for all of the previous fiscal year. The loss of steam would put overall revenue growth for the current year at a record low of 20%-23%.

Alibaba touted record results for its Singles Day shopping festival this year, but the company’s earnings from last quarter tell a gloomier story.   © Reuters

Alibaba rarely issues earnings projections. The unusual disclosure seemed intended to head off further damage to Alibaba’s stock price after an already rough year.

Around this time in 2020, market expectations for the company were higher than ever thanks to anticipation for the then-upcoming initial public offering by Ant Group, as well as cooped-up consumers driving demand for online shopping.

A year later, the company’s star has waned. In the earnings call, Alibaba touted its record results for Singles Day, the year’s biggest shopping event in China, reporting 540.3 billion yuan ($84.5 billion) in gross merchandise volume for the event that ended Nov. 11. But gains owed more to the fact that the sale went on much longer this year than in 2020.

A 17% year-on-year drop in operating profit for Alibaba’s commerce segment last quarter shows weakness in its core e-commerce business.

The company’s leading position in the industry has put it in the crosshairs of regulators, giving competitors an opening to exploit.

No. 2 Chinese e-commerce company JD.com reported an 18% rise in operating profit for its retail segment last quarter. Chinese authorities found in April that Alibaba violated antitrust law by pressuring merchants on its platform not to do business with rivals — a stumble that JD.com capitalized on to bring more manufacturers into its orbit.

The differing fortunes of the two companies were reflected in their stock prices the day after both released earnings. While Alibaba tumbled more than 10% in Hong Kong on Nov. 19, JD.com rallied over 9%. JD.com is also listed in New York.

Trouble is brewing for Alibaba outside e-commerce as well. Pinduoduo, now China’s No. 3 online retailer, and TikTok owner ByteDance are both jumping into mobile payment services, challenging the Alibaba-Tencent Holdings duopoly and posing a risk to one of Alibaba’s main profit sources.

Another potential pitfall involves live streaming influencers who promote products from Alibaba’s online marketplace.

Not long after Singles Day, where live streamers played a big role, two big-name influencers on Alibaba’s platform were accused last week of tax evasion. The pair, who boast a combined 25 million followers on Weibo, together face more than $14 million in fines.

One of the two — Zhu Chenhui, who goes by Xueli Cherie online — sold nearly 4 billion yuan in products on Alibaba’s platform last year. Zhu issued an apology and said she would take a break from streaming. The scandal could destroy her prospects in a field where popularity is crucial.

Livestreaming is lucrative both for influencers and for Alibaba. But long-standing tax-related practices in the industry are drawing regulatory scrutiny.

“There could be more allegations of tax evasion in the future,” said a source familiar with the situation.

Chinese President Xi Jinping’s “common prosperity” push could create an even tougher regulatory environment for Alibaba, which has been under fire for what critics consider excessive profits.

This article was first published in Nikkei Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.