21st Century Business Herald reporter Tao Li and Dong Jingyi report from Shanghai
Jack Ma, the founder of Alibaba (89988. HK) who has not appeared for a long time, has made a new move, causing the capital market to boil.
On January 25th, SoftBank Group disclosed to the public that in April 2020, its wholly-owned subsidiary Skybridge LLC used 512.3 million shares of Alibaba stock (equivalent to approximately 64 million ADR) to sign prepaid forward contracts with financial institutions. The contracts were implemented in stages from October 2021 to January 2024, and all physical settlements have been completed. Non recurring income is approximately RMB 61.17 billion.
These contracts do not equate to a formal sale of stocks, but due to SoftBank's early settlement of these contracts, it means waiving the option to retain shares and actually completing the reduction of Alibaba shares.
After purchasing approximately $50 million in Alibaba stocks in the fourth quarter of 2023, Jack Ma's shareholding exceeded 4.3% at the end of 2021. At the same time, Cai Chongxin purchased $150 million in Alibaba stocks through his family investment platform. The total shareholding of the two individuals has exceeded that of SoftBank Group. According to estimates, Jack Ma replaced SoftBank as the largest single shareholder of the company.
Alibaba has not made a public response to the above news.
Insiders told 21st Century Business Herald reporters that this change is true.
The industry is concerned whether this move is a signal that Alibaba will emerge from a downturn. The joint increase in holdings by Jack Ma and Chongxin Cai not only stimulated a sharp rise in Alibaba's stock price, but also had a positive impact on the recovery of Chinese concept stocks.
Wang Ruchen, a senior Internet industry observer, said in an interview with the 21st Century Business Herald that there are two reasons why Jack Ma chose to buy back at this time. One is that the value of domestic Internet enterprises is seriously underestimated. In addition to the impact of external environment, there is also the impact of domestic continuous anti-monopoly policies, making Alibaba in a low value area; Secondly, the external environment has begun to change, and in recent times, relevant government departments have provided more obvious incentives for private and digital economies, especially for platform economy enterprises. The overall trend is becoming clearer.
"The upward trend should not change, it depends on how to rebuild confidence." In his view, Jack Ma and Cai Chongxin's increase in holdings is obviously more convincing than other shareholders or partners.
Meanwhile, since 2023, Alibaba has also been narrowing its investment boundaries and focusing on its main business as a new direction for management.
Alibaba bottoms out?
According to statistics from 21st Century Business Herald reporters, since the beginning of 2021, the overall cumulative decline of Chinese concept stocks has been huge, with many individual stocks experiencing a cumulative decline of over 90%, and their market value shrinking by over 1 trillion US dollars.
In 2023, only a few Chinese concept stocks saw an increase in stock prices, such as Pinduoduo and New Oriental, while the majority of Chinese concept stocks saw a decline. Among them, some leading companies such as JD.com and Bilibili even experienced a drop of over 50% within a year.
According to statistics from Huayixin Capital, among the newly listed Chinese concept stocks, 24 companies currently have their stock prices below the issuance price, with a high breakout rate of 66.7%.
Among them, the ups and downs of Alibaba are lamentable.
In October 2020, Alibaba's stock price rose to a historic high of $319.32, with a market value exceeding $800 billion. On January 22nd, its stock price hit a low of only $64.8. In the past three years, its market value has evaporated by about $660 billion.
Alex Yao, an analyst at JPMorgan, significantly lowered the ratings and target prices of 28 major Chinese concept stocks in 2022, citing the rise in geopolitical and macro risks, which led global investors to reduce their investment in China's Internet industry. This measure has intensified market panic and further pushed down Chinese concept stocks.
In this context, over the past year, Alibaba has begun to vigorously repurchase company stocks. The company repurchased a total of 897.9 billion shares of common stock for a total price of $9.5 billion in 2023, equivalent to approximately RMB 68 billion. Companies conducting stock repurchases are usually aimed at increasing stock prices and boosting investor confidence, and large-scale repurchases often indicate that the market may be approaching a temporary bottom.
Alibaba's action, combined with its founder and chairman's shareholding increase, has had a positive impact on the market. From a business perspective, Alibaba's growth remains stable.
Last December, Alibaba released its interim report for the fiscal year 2024 (for the six months ended September 2023, hereinafter referred to as the "semi annual report"). The report shows that in the first half of the fiscal year, Alibaba Group achieved a year-on-year increase of 11% in revenue, a 25% year-on-year increase in adjusted EBITA, and a 52% year-on-year increase in operating profit.
Among them, Taotian Group's revenue increased by 8% year-on-year; Alibaba International Digital Business Group's revenue increased by 47%, while Cainiao Group's revenue increased by 29%; The local lifestyle group's revenue increased by 22%; The revenue of Da Wen Yu Group increased by 21%. Under the dual drive of AI and public cloud revenue growth, Cloud Intelligence Group has optimized its profitability.
For this transcript, both UBS and Goldman Sachs have stated that the current valuation of the Chinese stock market is already at a very attractive level, and valuation recovery is an important driving force for the Chinese stock market in 2024. Both of the top companies rated Alibaba as one of the preferred stocks in China's Internet and e-commerce sector in 2024.
"The market pays too much attention to factors beyond performance, but fails to see the full picture and overreacts," UBS bluntly stated in a report in November 2023.
"For Alibaba, the biggest pressure comes from the anti-monopoly aspect, and today the anti-monopoly atmosphere is dissipating. Previously, this atmosphere continued to spread, leading to a small policy change. As long as it talks about platform companies or Alibaba, it is easy to trigger capital selling." Wang Ruchen believes that Pinduoduo targets more parts of Taotian Group, and the revenue scale of both sides There is still a gap in profitability and diversity. The value of many of Alibaba's diversified businesses is not reflected in its market value.
The capital market still looks forward to a rational return. After undergoing organizational changes, a change of leadership, and a strategic shift, Alibaba is still exploring a better direction.
Shrinkage boundary
After nearly three years of downturn, Ma Yun's shareholding increase has also had a positive impact on the Internet industry. In addition to the general rebound in stock prices, the mentality of practitioners has also changed. "At the right time, only the return of the founder can activate the entire game," an entrepreneur told reporters.
The restoration of value and the reconstruction of confidence both require time.
The Comprehensive Strength Index of China's Internet Enterprises (2023) shows that the comprehensive strength index of China's Internet enterprises in 2023 will be 717.8 points, down 1.8% year on year. The index is mainly calculated by enterprise size, profitability, innovation and other indicators; The scale index value was 983.5 points, down 5.7% year on year, mainly related to corporate revenue, Internet business income, market value and other indicators.
Both of these data are the first year-on-year declines in the past decade. In addition to unfavorable factors such as industry regulation, policy restrictions, and changes in Sino US relations, former capital pets also faced problems such as market saturation, insufficient technological innovation, and homogeneous competition.
Since 2023, Alibaba has been making continuous big moves.
In mid November, at a conference call with analysts on Alibaba's third quarter financial report, Wu Yongming, as the newly appointed CEO of Alibaba Group, participated for the first time and announced a series of changes: suspending the IPO of Hema Fresh and no longer advancing the complete spin off of Cloud Intelligence Group. At the same time, Alibaba's first batch of strategic innovation businesses, known as the new "Four Little Dragons" of 1688, Xianyu, DingTalk, and Quark, have emerged.
New businesses are growing, while old layouts are shrinking.
For some investments, we still have the opportunity to monetize them, and through monetization, we can also return value to the group's shareholders in the future, thereby helping the group improve its return on capital. In addition, we have many other investments, including equity securities, stock investments, and investments in related companies. All of these investments are also a resource that we can use to enhance capital return Report rate. " Alibaba Group CFO Xu Hong stated that the group plans to increase ROIC (Return on Capital) to double-digit levels in the coming years.
For non core businesses, it is necessary to quickly convert this investment into profitability. Otherwise, more subtraction will be performed.
At the end of 2023, six A-share listed companies, including Macalline, YTO Express, Amazing Home, Meinian Health, Focus Media, and Qianfang Technology, announced that Alibaba (China) Network Technology Co., Ltd. (hereinafter referred to as "Alibaba Network") would transfer its shares in the listed company to the newly established Hangzhou Haoyue Enterprise Management Co., Ltd. (hereinafter referred to as "Hangzhou Haoyue").
The total equity transfer price of the six listed companies mentioned above is approximately 19.368 billion yuan.
In addition, Li Ren Li Zhuang also announced that Alibaba Network plans to transfer its 70.3767 million shares (17.57%) of the company to Hangzhou Haoyue at a price of 11.26 yuan per share, with a total transfer price of 792 million yuan.
According to the company registration information, Hangzhou Haoyue was established on October 24, 2023, with Taobao (China) Software Co., Ltd. holding 57.59%, Zhejiang Tmall Technology Co., Ltd. holding 35.75%, and Alibaba. com China Limited holding 6.66%.
This is completely consistent with the shareholder composition of Alibaba Network. The disclosed announcement states that the series of changes in Alibaba's network are aimed at "highlighting the independent development of main and non main businesses."
A person close to Alibaba told 21st Century Business Herald that, in layman's terms, too many things were previously handled by Alibaba Network as the main entity. Now, in order to separate the main and non main businesses, the investment entities have been transferred to Hangzhou Haoyue.
In fact, with the setback of giants and the shadow of anti-monopoly, the investment and financing activity in the Internet field declined significantly. According to the research report of the Internet Investment and Financing Operation in the Third Quarter of 2023 released by the Chinese Academy of Information Technology, the number of Internet investment and financing cases in China fell by 54% year on year in the third quarter, and the amount disclosed fell by 36.4% year on year.
Anbang Consulting believes that in the process of slow recovery of China's economy from the epidemic, the domestic Internet economy will also have a more difficult year in 2023. As the market value of traditional Internet "giants" such as Alibaba is shrinking, many people have realized that the flow economy is reaching the border. With increasingly clear policy boundaries and market space, the rise of a new generation of mobile Internet enterprises means that the domestic Internet economy is undergoing a new iteration.
Perhaps the decision that Jack Ma is making is to focus on his main business, increase technological transformation, and search for new growth in the blue ocean, rather than fighting in the red ocean.