Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Alibaba has put on hold the planned listing of its logistics arm, which bankers had hoped to take to market at a $20bn valuation, blaming market conditions.
Chair Joe Tsai told analysts in a call on Wednesday that the company’s plans for an initial public offering of Cainiao, its logistics unit, and supermarket chain Freshippo had included a “caveat”, which was “that all these transactions were subject to market conditions”.
“Market conditions currently are just not in a state where we believe we can really truly reflect the true intrinsic value of these businesses,” he said.
The announcement during Alibaba’s earnings call comes amid a tumultuous period for China’s best-known tech company. The group, founded by Jack Ma, began last year by announcing it would split into six businesses to unlock shareholder value. It reversed key parts of the programme months later when Eddie Wu took the helm as chief executive.
Sales for the three months to December 31 rose 5 per cent year on year to Rmb260bn ($37bn), the Chinese tech giant reported on Wednesday, just short of Wall Street analysts’ expected Rmb262bn. Net income dropped 77 per cent as Alibaba wrote down the value of some businesses and the market value of its investment portfolio sank.
Alibaba meanwhile added $25bn to its share repurchase programme, leaving the group with $35bn to spend on its own shares by March 2027.
The group’s shares fell more than 4 per cent in early trading on Wednesday in New York. They have dived 75 per cent from late 2020, when Beijing called off the IPO of sister company Ant Group. The Hang Seng index has shed 24 per cent over the past year.
“Overall Alibaba’s business is still declining, especially its core business, Taobao and Tmall,” said Li Chengdong, head of internet think-tank Haitun. “They no longer even mention gross merchandise value growth.”
Li said the slow growth would leave Alibaba working to increase profitability by cutting costs. The company said it cut 20,000 staff positions last year.
Tsai said Wu had been reviewing Alibaba’s core businesses and decided “right now, focusing on generating synergies within the companies in our group will be the best way to reflect the value of the entire Alibaba Group”.
The rethink has left even employees unclear about what pieces of the sprawling Alibaba business will remain tethered to its core ecommerce platforms Tmall and Taobao.
Tsai said Alibaba would continue selling down its portfolio of non-core assets such as listed company shares. It has cashed out $1.7bn of assets since March. The group plans to exit its physical retail businesses, he said, adding that “this will take time given the challenging market conditions”.
Last year, after accounting for share issuance to employees, the group cut its total share count by 3.3 per cent and Alibaba said it would target cutting its share count 3 per cent annually for the next three financial years.
“Upsizing our share repurchase programme demonstrates our strong competence in our business fundamentals,” said chief financial officer Toby Xu. He indicated Alibaba would consider taking on debt to increase the pace of share repurchases.
