Alibaba T3 earnings: Company gears up to face investors as China crackdown escalates

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According to analysts polled by Refinitiv, the company is expected to report a 33% jump in revenue for the quarter ended in December compared to a year earlier.

But strong earnings may not be enough to allay the worries of investors, who have been rocked by concerns about how harsh Chinese officials are against Jack Ma’s tech empire.

Ma, who co-founded Alibaba more than two decades ago, has made the company one of China’s most powerful tech titans. It generated nearly $ 80 billion in revenue for the fiscal year ended last March, and its market capitalization of over $ 700 billion makes it one of the most valuable technology companies in the world.

But Beijing is increasingly concerned about the influence that large private tech companies have over the financial sector and other sensitive areas, and how they are anchored in daily life in China through digital payment applications. and other services.

In November last year, Alibaba shares slipped even though the company’s profits exceeded estimates, as it released results just after regulators put on hold a much-anticipated IPO of its financial affiliate, Ant Group.

Since then, the landscape has deteriorated for Alibaba and other Chinese tech companies. President Xi Jinping in December called efforts to strengthen anti-monopoly rules against online platforms as one of the most important goals for 2021, according to the state-run Xinhua news agency. And regulators announced an antitrust probe into Alibaba on Christmas Eve.

Ant Group, meanwhile, was ordered to review its online financial activities after authorities criticized it for driving rivals out of the market, harming consumer rights and taking advantage of regulatory loopholes for its own benefit.

Yi Gang, the governor of the People’s Bank of China, said at a Davos virtual forum last week that the regulator’s involvement in the company was ongoing.

Ma, co-founder of Alibaba, who retired from the company but still remains a leading figure, has remained largely out of sight during it all. He disappeared from public view for months before briefly emerging in January to speak to teachers at a philanthropic event.

The problems Alibaba and Ant are facing took a bite out of the former’s share price. New York-listed Alibaba shares are down about 17% from a high in late October, a drop that wiped out more than $ 140 billion from its market cap.

Some analysts suspect that Alibaba could survive China’s relatively intact regulatory review. Martin Chorzempa, senior researcher at the Peterson Institute for International Economics, said Chinese authorities probably wanted to be careful “not to kill the goose that lays the golden eggs” after all.

But experts warn the days of uncontrolled growth are likely over.

“It’s clear that [Beijing] will restrict the scope of managerial independence through regulation and informal “ guidelines ” to [Alibaba] conglomerate, ”said Doug Fuller, associate professor at City University in Hong Kong who studies technology development in Asia.

As for Ant Group, the company will likely still be allowed to IPO once regulators finish toasting the company over anti-monopoly concerns. and consumer privacy concerns, according to Kevin Kwek, managing director and senior analyst at Alliance Bernstein.

But if he’s forced to make drastic changes, it could hurt Ant’s valuation when he is finally able to list. Prior to the IPO’s withdrawal, Ant was set to become the largest initial public offering ever with a sale of shares of $ 34 billion.

“You can bet the best minds of Ant [are] working on the challenges as we speak, ”Kwek said. The question is, to what extent do they end up “giving up” and what that might mean for evaluations. “

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