Thursday, July 25, 2024

Alibaba shares jump after founder Jack Ma says the company is successfully fixing the ‘diseases of a big company’

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Alibaba founder Jack Ma is giving his e-commerce company and its executives some much-needed praise. Just over a year ago, the Chinese tech giant announced an ambitious restructuring plan—only to hit stumbles due to new domestic competition, a management reshuffle, and geopolitical rivalry. But on Wednesday, Ma took to Alibaba’s internal forums to express strong support for the company’s direction—and gave the company’s shares a boost.

In his post, Ma said Alibaba was embracing a more aggressive start-up mindset. “We are starting to operate on the diseases of a big company,” Ma wrote, according to a translation from Bloomberg. While Alibaba once suffered from “slow decision-making,” it is now a firm “where efficiency and market leadership are paramount, making our company once again simple and agile,” he wrote.

Ma also praised Alibaba CEO Eddie Wu and chair Joseph Tsai, two Alibaba co-founders who took the reins of the company in a September management reshuffle.

Investors seem to be thrilled by Ma’s show of support. The company’s Hong Kong-traded shares jumped 4.9% in Wednesday trading. The broader Hang Seng Index, which tracks the largest companies traded in Hong Kong, rose 1.9%.

After years of staying out of the spotlight, Ma is starting to comment more regularly on Alibaba’s direction.

Ma wrote a post company’s internal forum last November, where he called on employees to help the company “correct its course” in the face of fierce competition from PDD. “Every great company is born in a winter,” he wrote at the time.

Ma backed up his call with his wallet, by reportedly buying $50 million worth of Alibaba shares in the last quarter of 2023. Tsai’s family office also bought an additional $150 million worth of shares. 

Alibaba’s restructuring woes

Just over a year ago, Alibaba announced an ambitious restructuring plan, where it would pursue IPOs and listings for its six different divisions. But the company’s new executives are revising those plans amid a weak IPO environment and renewed competition in e-commerce, its core business.

In mid-November, the company abandoned plans to spin off its lucrative cloud computing division as an independent company. The company blamed expanded U.S. controls barring the sale of advanced chips to Chinese companies.

Then in March, Alibaba withdrew plans to list its Cainiao logistics unit on Hong Kong’s stock exchange. Instead, the company will take full ownership of the division. “We believe this is an appropriate time to double down” on logistics, Tsai said at the time. 

The company is also focusing on reinvigorating its e-commerce division amid a slower Chinese economy and new competition from companies like PDD. In late December, CEO Eddie Wu took direct control of Alibaba’s e-commerce operations.

Alibaba reported $36.6 billion in revenue for the quarter ending Dec. 31, 2023, a 5% increase year-on-year. “Our top priority is to reignite the growth of our two core businesses: e-commerce and cloud computing,” Alibaba CEO Eddie Wu told analysts during an earnings call in February.

In his recent post, Ma suggested that Alibaba’s restructuring would remain tough. “This path of reform and innovation has never been accompanied by applause,” he wrote.

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