Alibaba’s Hong Kong-listed shares jumped 4% on Monday morning.
Qilai Shen | Bloomberg | Getty Images
Performance of Alibaba’s Hong Kong-listed shares
In March, Alibaba announced a serious restructuring of its businesses, which some analysts suggested could signal that the Chinese government could loosen its grip on the domestic tech industry.
“Nevertheless, [regulators] have also emphasized the necessity for extra broader industry-wide regulations to effectively regulate your entire sector,” Oshadhi Kumarasiri, equity analyst at LightStream Research, said in a report published on research platform Smartkarma.
“This implies that the optimism regarding the top of regulatory scrutiny could also be premature, as the brand new broader regulations could possibly be equally stringent,” said Kumarasiri.
Ronald Wan, non-executive chairman of Partners Financial Holdings, told CNBC’s “Street Signs Asia” that the expansion rates of Alibaba and Ant Group shall be “significantly restricted in future.”
“Though we’ve got seen the excellent news of the settlement of the dispute on the regulatory front, it implies that, in future, Ant Group could also be operating like a state owned bank in China,” said Wan.
Shawn Yang, managing director of Blue Lotus Research Institute, is bullish on Alibaba following Ant Group’s advantageous.
“We calculate that Ant Group can be value $89 billion~ of which Alibaba’s stake is $29.4 billion~ given their 33% ownership in Ant Group. We recommend such valuation presents upside from consensus,” said Yang, referring to Bloomberg’s valuation of Ant Group at just $22 billion to $57 billion.
“In our view, [Bloomberg’s] valuation range is simply too low, as Ant Group is comparable to PayPal. With the top to regulatory overhang on Ant Group, we advise that it may possibly be valued at a multiple that’s more much like PayPal, which suggests upside to the Bloomberg valuation,” said Yang.
On Saturday, Ant Group announced a share buyback that values the corporate at $78.53 billion, in accordance with state media CGTN. That is lower than Ant’s $315 billion valuation when it tried to list in 2020.
Kumarasiri said that the buyback “raises questions, especially if the corporate had plans for an IPO within the near future.”
“The corporate’s justification for the buyback, which incorporates providing liquidity to existing investors and attracting or retaining talented individuals through worker incentives, seems unnecessary if an IPO was imminent.”
