Due to obstacles in the way of Alibaba in its homeland, China might not be an asset to Alibaba anymore
It is a well known fact that Alibaba Group Holding posted a record breaking Initial Public Offering (IPO) in history two years ago. IPO of the Chinese tech giant was the biggest ever. During that time, the company profited from being a ‘proxy’ for a Chinese economy that shareholders and investors were counting on. This majorly contributed towards the IPO back then. However the reason of as to why Alibaba posted a massive IPO is now considered as a liability just 16 months later than that.
It cannot be denied that Alibaba Group is a giant of a company not only in China but the world. Currently, the firm is valued at a massive $230 billion or more in the market. But Bloomberg reports that it has lost nearly $29 billion in market capitalization in January alone. It was not only because of the company’s push for market capitalization but investors and shareholders were whining over the dependence of the e-commerce market on China. China’s economy was growing at its slowest pace since 2009 and this resulted in slowing growth, falling market, and weakening the value of its home currency.
It is believed that the shares have returned to the price of IPO and as of now it is not performing well in the New York Stock Exchange Composite Index as well as Bloomberg China US Equity Index. For the first time in a very long time, Alibaba stocks were said to be underperforming in the market and this worried the investors and shareholders. They were concerned whether Alibaba is threatened with the recent entry of JD.com in the market or the charm of domination the Chinese e-commerce industry is fading away.
Alibaba is expected to announce its quarterly earnings come Thursday and it is believed that the company will post a revenue growth of 27 percent only which is the lowest since June 2012. The sales that the company made in China increased in the last three months to a massive 83 percent. This further urged the owner of Alibaba, Jack Ma, to continue with its international market expansion which also included Lyft Inc. which is a ride sharing service. Also, the Chinese giant recently acquired the leading newspaper, South China Morning Post.
According to an analysts at Arete Research Service LLP based in Hong Kong, Li Muzhi, stated “Investors largely see Alibaba as a proxy for China’s economy, and right now there’s just not a lot of good news. Alibaba has been trying to branch out revenue streams, but that takes time to develop.”
The government, investors, and the company officials knew that Alibaba was likely to be hit by a storm due to the dying economy of the country. As JD.com is a new entry which is also covering the loopholes left by Alibaba, it is performing way better and the revenue growth is promising regardless of the country’s economical and financial situation.
Jack Ma already warned the shareholders in November that the coming one year can be a rough patch for Alibaba. Several tech giants in the region would struggle to perform in the market as the Chinese government just tried to rebalance its economy. In an exclusive interview to Bloomberg, Jack Ma stated that he is looking for opportunities where the Chinese online retailer generates half of its revenues from the international markets. As of now, Alibaba has little or no presence in the international markets and it is trying to make its name in the foreign countries.
The founder and chairman also announced that the strategy to improve its revenue growth and international expansion included 28 deals which were valued at a massive $17.3 billion.
Bloomberg reported “The company invested in the movie ‘Mission: Impossible - Rogue Nation,’ appointed directors for its operations in France and Germany, and expanded its online payment system Alipay to more than 100 countries.” Alibaba is now focused to include a few of the largest American brands on its online marketplaces in the near future as Chinese online shoppers prefer buying international products. It is believed that the international expansion strategy can be done using acquisitions and deals as well as organic growth through its services.
This is the reason of as to why Bloomberg reported that China might not be the same market for Alibaba as it was previously. The market and economy is not helping the company to do wonders whereas Alibaba is focused to improve its foreign market status and position.
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