Alibaba has increased its share buyback plan to $25 billion as the Chinese e-commerce group seeks to boost investor confidence after slowing growth and a crackdown on the tech sector sent the company’s shares to multi-year lows Has.
The e-commerce group founded by Jack Ma has lost about 65 percent of its value since Chinese authorities canceled the IPO of its fintech arm Ant Group in November 2020, sparking months of regulatory scrutiny of the country’s biggest tech groups.
Alibaba said Tuesday it would increase its authorized share buybacks from $15 billion to $25 billion over the next two years. The company has already repurchased $9.2 billion worth of stock under the program.
Alibaba’s Hong Kong-listed shares were up more than 12 percent by late afternoon. Shares of the company are up more than 40 percent since last week, when Liu He, China’s top economy official, made a rare intervention to reassure investors and said Beijing will soon complete its “rectification” of the country’s major tech platforms .
China’s State Council, the country’s de facto cabinet, on Monday reiterated Beijing’s pledge to boost growth and protect financial markets from political devastation.
Rising geopolitical risks related to Russia’s invasion of Ukraine, US efforts to begin the delisting process for Chinese stocks in New York and a worsening mainland Covid outbreak have also added to market volatility in recent weeks guided.
Daniel Zhang, Chief Executive, has repeatedly said that Alibaba’s shares are undervalued and the company would continue to buy back shares.
Public filings also suggest that Ma and Joe Tsai, Alibaba’s executive vice chairman, have slowed their stock sales amid the decline. Tsai didn’t sell any shares in the second half of 2021, and Ma only sold about 10 million shares during the year, about half the amount he sold in previous years.
According to research group Bernstein, Alibaba trades at a forward price-earnings multiple of 12.2, with cash on its balance sheet accounting for more than a quarter of its market value.
The relatively cheap share price has attracted well-known value investors like Berkshire Hathaway Vice Chairman Charlie Munger, but the company has yet to assuage the skepticism of many Wall Street analysts.
Robin Zhu, an analyst at Bernstein, pointed to Alibaba’s slow growth and declining margins as a concern. “Share buybacks should boost shareholder returns, but the longer-term problem is competitive headwinds in China’s e-commerce,” Zhu said.
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Alibaba reported its slowest quarterly revenue growth since its IPO in 2014 in the fourth quarter, with revenue up 10 percent year over year — the first time growth had fallen below 20 percent.
The company’s main e-commerce business faces growing competition from legacy e-commerce groups like Pinduoduo and JD.com, as well as newer platforms like ByteDance’s Douyin, TikTok’s sister app in China, with influencer products sell via streaming content.
Alibaba was fined a record $2.8 billion for abusing its market position last year, and Ant remains under regulatory scrutiny.
Alibaba also announced that Shan Weijian, chairman of Hong Kong-based investment group PAG, will replace Borje Ekholm, chief executive of Swedish telecom group Ericsson, as an independent board member effective March 31.
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