Alibaba Group Holding Ltd (阿里巴巴) looked like a sure thing a year ago when it pulled off the largest initial public offering (IPO) ever. It had a lock on Chinese e-commerce as the economy was surging and consumer spending was steadily rising. Shares soared 76 percent from the IPO price in just two months.
Then it all crumbled. Alibaba came under fire from a Chinese government agency, it cut deals that baffled investors and it replaced its chief executive as growth slowed. Most important, China’s economy turned wobbly, jeopardizing the rise in consumer spending Alibaba needed. Its stock slid down, down, down to the IPO price and then below. The sure thing was no such thing.
What now? Investors who watched US$128 billion in market value disappear should not expect a reprieve any time soon. Atlantic Equities LLP’s James Cordwell, the top-ranked analyst covering the stock, predicts the slowing Chinese economy will undercut e-commerce transaction growth until at least next year. The many deals Alibaba has negotiated will take time to pay off, too.
“All the operating metrics seem to be pointing in the wrong direction,” said London-based Cordwell, who topped Bloomberg Absolute Return rankings for his calls on Alibaba and also recommendations across the portfolio he covers. “Until investors feel some comfort in that slowdown bottoming out, it will be hard for the stock.”
Alibaba chairman and cofounder Jack Ma (馬雲) is not known for coddling investors. In a letter with the IPO filing, he said explicitly shareholders would be the third priority after customers and employees. He and his partners did not want short-term market volatility to distract from building a successful business for the long term.
Indeed, many of Alibaba’s troubles derive from a domestic economy, over which it has no control. While conceding some missteps in its first year, Alibaba is not one for introspection.
“We don’t think about events backward-looking, we try to look forward,” vice chairman Joseph Tsai (蔡崇信) said in an interview. “We have made our mistakes and we learned from them.”
The Hangzhou-based company is trying to push beyond China and e-commerce, announcing US$15 billion of deals. Many of the investments make clear strategic sense, but others have been harder to rationalize, like the stakes in a Guangzhou soccer team, a minor player in Chinese smartphones and an unprofitable entertainment studio.
“Its investment strategy does sometimes seem befuddling,” said Li Muzhi, a Hong Kong-based analyst at Arete Research Service LLP, who rated Alibaba a “D” for wealth creation in his one-year report card on the stock. “When its core business was doing fine, all these investments for future development were option values, but with the slowdown they make less sense.”
Ma and his partners do have a vision for how all this comes together in the next decade. The aim is for Alibaba to evolve beyond commerce into content like movies and sports, to provide payment systems for its own trade and for others and to get technology like its homegrown operating system and its cloud-computing service used more broadly.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day