For many renowned tech titans, the year 2020 was not a great one. For Chinese billionaire Jack Ma’s businesses too, it was not all rosy.
The anti-monopoly investigation initiated by Chinese regulators into Alibaba Group last month, and the absence of the billionaire founder from the public domain over the last two months, since the collapse of Ant Group’s initial public offering (IPO), are casting a shadow on the success of the eCommerce giant’s shares.
The stock price of Alibaba Group fell 2.15 percent in last day’s trading in Hong Kong to close at $29.35, as investors became increasingly worried about regulatory hurdles. The eCommerce company’s share price has fallen by a quarter from its peak since the start of the investigation, according to financial experts.
“However, what is important from Alibaba’s perspective is China’s newly enacted laws and regulations regarding its monopolistic behavior,” said analysts. “The country’s policymakers are concerned and view the company as too big as well as risky. Only clarity regarding the policy can remove the current bearishness in the stock.”
But they added that Alibaba “is still the best play on Chinese consumers” and will always be on investors’ radar once there is more certainty regarding the country’s policy. Even though investors are shying away from Alibaba’s stock, that could change as the company’s valuations are cheap when compared to its Western peers, they predict. “And it is generally expected that China will not damage the fortunes of its biggest corporate success story.”
Alibaba and payments giant Ant Group are facing antitrust scrutiny and questions over risks to financial stability. The unravelling of Ant’s $35 billion IPO in November set in motion a string of decrees regulating China’s technology sector.
Few strategists said that Mr. Ma was instructed to remain in China during the probe by mainland regulators. “This continues to weigh on Alibaba stocks as Chinese regulators are concerned about technology companies getting too powerful and venturing into financial services, where their monopolistic tendencies can squeeze out banks from a lower fees perspective. Banks do not possess the means or wherewithal to complete with tech sector behemoths.”
In a rare expression of opinion against the Chinese government, Mr. Ma said in October last year that China’s financial system was “stifling” tech innovation. He has since edged away from the public limelight since the Ant IPO collapsed.
Investors are also worried that the antitrust scrutiny and tighter regulations will spread beyond Mr. Ma’s internet empire to other powerful tech companies such as Tencent Holdings and JD.com.
“Investors are shying away from large China tech in favor of smaller tech [firms] that might sneak in through the side door providing tech services that the large tech might not be allowed to complete,” add experts.
Regulators have asked FinTech giant Ant Group to revamp its business model and return to its original business as a payment services provider. The group is reportedly planning to form a holding company to house its wealth management, consumer lending, insurance and payments services as well as MYbank.
Under such a structure, Ant’s businesses would likely be subject to more capital restrictions.