Alibaba shares rise after Chinese regulators fine Ant Group, ending regulatory uncertainty

In March, Alibaba introduced a significant restructuring of its companies, which some analysts recommended might sign that the Chinese authorities might loosen its grip on the home tech trade.

“However, [regulators] have also emphasized the need for additional broader industry-wide regulations to effectively regulate the entire sector,” Oshadhi Kumarasiri, fairness analyst at LightStream Research, mentioned in a report revealed on analysis platform Smartkarma.

“This suggests that the optimism regarding the end of regulatory scrutiny may be premature, as the new broader regulations could be equally stringent,” mentioned Kumarasiri.

Shawn Yang, managing director of Blue Lotus Research Institute, is bullish on Alibaba following Ant Group’s fantastic.

“We calculate that Ant Group would be worth $89 billion~ of which Alibaba’s stake is $29.4 billion~ given their 33% ownership in Ant Group. We suggest such valuation presents upside from consensus,” mentioned Yang, referring to Bloomberg’s valuation of Ant Group at simply $22 billion to $57 billion.

“In our view, [Bloomberg’s] valuation range is too low, as Ant Group is comparable to PayPal. With the end to regulatory overhang on Ant Group, we suggest that it can be valued at a multiple that is more similar to PayPal, which suggests upside to the Bloomberg valuation,” mentioned Yang.

On Saturday, Ant Group introduced a share buyback that values the corporate at $78.53 billion, in line with state media CGTN. This is decrease than Ant’s $315 billion valuation when it tried to checklist in 2020.

Kumarasiri mentioned that the buyback “raises questions, especially if the company had plans for an IPO in the near future.”

“The company’s justification for the buyback, which includes providing liquidity to existing investors and attracting/retaining talented individuals through employee incentives, seems unnecessary if an IPO was imminent.”