Alibaba Group Holdings (9988.HK) finds itself at the centre of attention as Chinese billionaire Jack Ma’s family trust is set to offload 10 million American Depository Shares. The shares are valued at approximately $871 million. Scheduled for November 21, the share sell-off will be by JSP Investment and JC Properties.
The company has been grappling with a series of setbacks, including a significant restructuring of its C-suite. Earlier in the year, it was reported that the company was in the works of dividing itself into six separate entities. According to Reuters, these units were meant to pursue funding and public listings. This came as the Chinese government relaxed its regulation of private businesses. Recently, Alibaba has abandoned plans to spin off its cloud operations. The company has also put a temporary halt in the listing of its supermarket unit.
Founder Jack Ma’s retreat from the company’s leadership in 2019 has not shielded Alibaba from the challenges it faces. There have been assurances from Chairman Joe Tsai that the company would initiate annual dividends. This was meant to appease investors. However, the response has been tepid at best. The shares sell-off disclosure, made through regulatory filings, has sent shockwaves through the market. It led to more than 3% drop in U.S.-listed shares, causing a $20 billion erosion in Alibaba’s market value. Share value has continued to slide in Friday’s Hong Kong trading.
Alibaba Ownership Structure
Alibaba remains without a controlling shareholder. Alibaba’s filings, as of July, indicated that SoftBank was the sole stakeholder holding more than 5% beneficial ownership in the company. Yet Softbank has been selling off most its shares. As rivals are spending billions in emerging niches such as AI, Alibaba appear to be rudderless.
The optics of Ma’s family trust divesting 10 million shares at this critical juncture are far from favourable. Eddie Wu is the current leader of Alibaba and a co-founder. He is facing the daunting task of steering the company through a turbulent period. Alibaba’s quarterly results, due to be released shortly, will be closely scrutinized as the company navigates through this storm.