alibaba logo on trailer

Alibaba stock is posting losses of nearly 1% today following news that one of its subsidiaries – Ant Group – has applied to obtain a key license that will allow the business founded by Jack Ma to operate as a financial holding company.

Just five days ago, an exclusive report from Reuters indicated that China’s central bank accepted Ant’s application to incorporate the holding company, this being the first step in the process of securing the required license.

Sources cited in the article told Reuters that this was a positive signal that increased the odds that the company will obtain its long-sought license to operate with regulators’ blessing following a failed initial public offering in 2020.

Alibaba (BABA) reportedly owns around a third of Ant Group. However, the Chinese government has been forcing the two companies to disentangle from each other as Ant Group would now be subject to increased regulatory oversight as it will become part of China’s financial system.

How Much is Ant Group Worth to Alibaba?

Receiving the green light from China’s central bank would revive hopes that Ant may soon be able to list its shares in the country’s public markets – a move that may result in short-term gains for Alibaba.

Days before authorities cracked down on Ant’s IPO, the firm was reportedly being valued at as much as $300 billion. As a result, Alibaba’s stake in Ant was worth approximately $90 billion at that point and it helped lift the value of the company founded by Jack Ma in the public markets.

However, financial services firm progressively slashed Ant’s right after the IPO was halted and it is now reportedly standing at around $80 billion. This would result in a $24 billion valuation for Alibaba’s 33% stake.

There was a lot of controversy concerning the events that took place back then. For example, Mr. Ma mysteriously disappeared for months shortly after he made some negative comments about the government’s lack of preparation to appropriately regulate up-and-coming tech ventures within the country.

“That day he apparently crossed the invisible red line for what can be said and done in Xi Jinping’s China”, said Christina Boutrup, a well-known China analyst.

Can Alibaba Stock Recoup Some of Its Lost Territory?

The backlash that accompanied the decision to halt Ant’s IPO was a bit unprecedented as authorities started to clamp down on the largest businesses within the tech sector such as Tencent Holdings and DiDi Global.

Some of the hottest subjects addressed by regulators included how algorithms used data to advertise products and services to the public and data management practices.

Also read: All You Need to Know Before Investing in Nio (NIO)

This hostile attitude spooked investors and led to the collapse of Chinese tech equities as reflected by the KraneShares CSI China Internet ETF (KWEB), which experienced a 53% in 2021 alone.

Alibaba stock faced some of the worst backlash from investors across the globe as Ma’s strange disappearance along with the failed IPO of its valuable subsidiary created room for all sorts of analyses and conjectures.

alibaba stock price chart

Alibaba Group Holdings (BABA) price chart – Source: TradingView

In 2021, Alibaba’s US-listed American Depositary Shares (ADS) went down 48.9% while the foreign stock is accumulating a 12% loss since 2022 started.

This year has been more friendly for Alibaba as Chinese regulators appear to be easing their grip on the tech sector. In this regard, reports pointed to top officials from the Chinese government meeting with executives from the largest firms in the industry in May this year as the country’s economic growth has been affected by the reintroduction of lockdowns in key cities.

Notably, the country’s Vice Premier, Liu He, stated that the government will actively support the development of this sector and that it had positive views concerning the listing of shares in the public markets.

However, analysts believe that the overall situation will not change in favor of large tech corporations as the government’s goal is to gain more control over the data these companies handle and the fortunes that have been amassed as a result of their success.

“I don’t believe that the regulatory actions will really stop. Various ministries still have a mandate to enforce all the regulations that have been amended and strengthened”, stated Charles Mok, a visiting scholar at the Global Digital Policy Incubator at Stanford University, during an interview with CNBC.

He added: “Even if there are some reversals, it may be too late to reverse the damage. For example, even if they allow more listings overseas, the investor confidence is already lost, and the scrutiny and hostility from the foreign market also cannot be reversed”.

Other Related Articles:

eToro CopyTrader™ Tool

Our Rating

eToro
  • Buy Crypto & Copy Trade Professionals
  • Average 30.4% ROI in 2021
  • Average 83.7% ROI in 2020
  • Copy a DeFi or Metaverse Portfolio
eToro
Cryptoassets are a highly volatile unregulated investment product. Your capital is at risk.