Jack Ma’s appearance in a minute-long video last week gave much-needed reprieve for Alibaba Group Holding Ltd (NYSE:BABA) after the crackdown by the regulator into its business practices. However, the investors still grapple with the dilemma of questions that wiped out its market value of $150 billion.
Expects to post the lowest growth in Q3
Alibaba expects to report the lowest growth in 5 years in Q3 results on February 2, 2021. It began experiencing problems in November 2020, after regulators clamped down on the record IPO of its sister company – Ant Group Co, and decided to probe its e-commerce business activities.
Alibaba expects to report a growth of 33% to reach $33 billion in Q3. It is on the backdrop of Singles’ Days Promotion extension in early November and October 2020.
Shares of Alibaba declined by 16%
After the aborted debut of Ant, the shares of Alibaba dropped by almost 16% and recorded its worst performance on Hang Seng Index. On the contrary, the valuation of its rival firm – Tencent Holdings (OTCMKTS:TCEHY) reached almost $1 trillion when the stock scaled new highs.
Expect to pay $7.8 billion as penalties
Alibaba, which is one of the fastest-growing private firms in China and set a barrier, now faces penalties of up to $7.8 billion or 10% of its total revenues if it is proven to have abused market dominance. A crackdown on Ant also expects to pose a negative outlook to Alibaba because its consumers borrow loans. The ongoing coronavirus impact also slows down the recovery of the Chinese economy and as a result, the industrial activity in China is slumped.
Its exclusive merchant agreements like Pick One of Two with merchants come under the scrutiny of regulators. The algorithms and predatory pricing techniques favor new users. Alibaba faces obstacles in overcoming the slowdown because of the regulator crackdown. The company is also accused of using measures to crush its rivals like JD.Com Inc.
Regulatory measures to cast effect on Tmall sales
Any regulatory measures that require Alibaba to halt its exclusive pricing mechanisms are likely to drop its Tmall sales to a 10th this year.
Kuaishou Technology, which is backed by Tencent, and ByteDance Ltd are tapping the live streaming to clinch a large pie of the e-commerce.
