HANGZHOU, CHINA – NOVEMBER 13: Alibaba founder Jack Ma attends the 5th Zhejiang World Entrepreneur Convention at the Hangzhou International Expo Center on November 13, 2019 in Hangzhou, Zhejiang Province of China.
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GUANGZHOU, China – Alibaba’s high-profile founder Jack Ma appears to be on the wrong side of the Chinese government, sparking a string of events that have boosted the e-commerce giant’s regulatory review and created uncertainty about its future. .
Even after Alibaba reported gains above expectations for the December quarter, analysts and experts warned that Ma’s friction with Beijing could hurt growth.
“Investors look at Alibaba with a much more careful look after being drawn to the history of growth and the global profile of the founder,” Rebecca Fannin, author of “Tech Titans of China,” told CNBC by email .
“Current frictions are a new reality for investors who may not have carefully considered how the company’s rise as a powerful technology titan could be a threat to the status quo.”
It started in October when Ma made some negative comments about Chinese financial regulators a few days before the Ant Group’s initial public offering (IPO) in Shanghai and Hong Kong, which would have been the largest in the world. Ma also founded Ant Group and Alibaba owns about a third of the company.
There are now two major concerns. First, that Ant Group could be forced to restructure and even reduce some of its businesses, such as the loan that has boosted its growth. These moves could seriously reduce their valuation. The second concern is whether regulators could force Alibaba to break or change parts of its core trading business, which is its main profit driver.
“At the moment, the biggest risk seems to be around investor confidence in Alibaba’s brand and ecosystem,” Neil Campling, Mirabaud’s head of technology, media and telecommunications research, told CNBC by email. Securities.
“But if there is stricter regulation for the basic engines of the Alibaba platform, it could certainly slow down the growth of Alibaba. After all, innovation and the intricate fabric of different aspects of the ecosystem combine to bring savings. of scale and growth “.
Campling has a long-term call rating for Alibaba shares.
Only “noise” for long-term investors
Fannin believes Ma’s friction with Beijing will “relax”, but it will take some “agility on Alibaba’s part to deal with government pressure, changing consumer needs in a digital economy and the concerns of consumers.” investors “.
Alibaba’s U.S. shares have been under pressure since Ant Group’s IPO, which fell from a record-high close of $ 317.14 on Oct. 27 to $ 254.50 in closing this Tuesday, a 20% drop.
But some analysts and investors remain bullish.
Mizuho raised its stock price target from $ 270 to $ 285 on Tuesday, saying that “the shares (are attractive with a regulatory steering wheel that has a majority price”).
Matthew Schopfer, head of research at Infusive, an asset manager that invests in Alibaba, said the recent concern around the technology giant “will be a long-term noise for the investor”.
“Alibaba is a prime example of China’s technological capabilities and we don’t expect the government to permanently damage the business. In addition, higher regulation will only consolidate scale players like Alibaba,” Schopfer told CNBC via email.
“When we get to the other side of these regulatory violations, we believe the market will once again focus on Alibaba and its platforms as a critical part of the daily life of the Chinese consumer and as a major beneficiary of Chinese spending growth and of the growing digitization of consumption “.