Follow

Jack Ma’s return fails to calm investor concerns

By People Daily
Friday, January 22nd, 2021
Billionaire Jack Ma. Photo/Courtesy
In summary
    • Investors say what they know is whether Jack is running around, Jack is hiding or something else, Alibaba is not in the clear. There is a lot more of the story still to see.
    • Some investors are, however, betting on long-term potential for Alibaba in the world’s second-largest economy with some saying they had protected against a potential fall when speculation about Ma’s whereabouts began.
    • Dennis Dick, a proprietary trader at Bright Trading, who holds Alibaba shares, said he had protected against a potential fall by buying put options. He covered those puts earlier in January on a report that Ma was OK and retains a long position in the stock.

Billionaire Jack Ma’s 50-second video reappearance has done little to resolve Alibaba Group’s troubled relationship with regulators that is making some investors hesitate about owning the Chinese e-commerce giant’s stock.

Relief at Ma’s first public appearance added $58 billion (Sh6.37 trillion) in market value on Wednesday as Alibaba’s Hong Kong-listed stock soared, though doubts crept in a day later and the stock fell more than 3 per cent as the broader market steadied near two-year highs.

Ma had not appeared in public since October 24, when he blasted China’s regulatory system.

That set him on a collision course with officials and led to the suspension of Alibaba fintech affiliate Ant Group’s blockbuster $37 billion IPO.

A source familiar with the matter said Ma cleared his schedule late last year to keep a low profile, prompting discussion at Alibaba about when and how he should reappear to assure investors.

It was decided he should do something that would appear as part of his normal routine, rather than anything overt that could irk the government.

While Ma has stepped down from corporate positions, he retains significant influence over Alibaba and Ant, and the regulatory crackdown on his business empire coupled with his absence was a concern for some investors.

There was skepticism that Ma’s brief reappearance meant all was well with his businesses.

“The coast is not all clear for Alibaba and it is a judgment call whether you believe the company can still thrive in the changing environment,” said Dave Wang, a portfolio manager at Singapore’s Nuvest Captial, which owns Alibaba stock.

“Without some skepticism, the price would be a lot higher,” he said, adding his firm had increased exposure to China and with it Alibaba, which he believes can prosper over the medium to longer term.

Two of the company’s investors in the United States who have sold out or reduced positions in Alibaba said they needed more reassurance about the company and the regulatory environment before reconsidering the stock.

Top criteria

“One of our top criteria is leadership and we were investing in Alibaba because I really respect Jack Ma as a leader,” said William Huston, founder and director of institutional services at independent investment advisory firm Bay Street Capital Holdings in Palo Alto, CA, with assets under management of $86 million.

“We all know that just because he showed up does not necessarily explain what is going on.”

Huston, whose firm cut its holding in the Chinese firm last year from 8per cent of its portfolio to less than 1 per cent, said the halting of the Ant IPO in November had caused uncertainty, and that Alibaba was “not a prudent investment” for it going forward.

David Kotok, chairman and chief investment officer at Cumberland Advisors, Florida, which has about $4 billion in assets, said he held Alibaba last year but also sold as the Ant IPO was pulled.

“When you don’t know what to do in an evolving situation like this you can’t use traditional securities analytics to reach decisions. We are standing aside and watching,” Kotok said.

Chinese regulators have set about reining in Ma’s financial and e-commerce empires since the Ant IPO suspension, which has weighed on its stock that remains below levels prior to the cancellation of Ant IPO.

“What his actual state is will be up to Beijing to reveal to us,” Leland Miller, CEO of US-based consultancy China Beige Book.     – Reuters