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

Performance of Alibaba's Hong Kong-listed shares

In March, Alibaba announced a major restructuring of its businesses, which immoderate analysts suggested could awesome that the Chinese authorities could loosen its grip connected the home tech industry.

"However, [regulators] person besides emphasized the request for further broader industry-wide regulations to efficaciously modulate the full sector," Oshadhi Kumarasiri, equity expert astatine LightStream Research, said successful a report published connected probe level Smartkarma.

"This suggests that the optimism regarding the extremity of regulatory scrutiny whitethorn beryllium premature, arsenic the caller broader regulations could beryllium arsenic stringent," said Kumarasiri.

Shawn Yang, managing manager of Blue Lotus Research Institute, is bullish connected Alibaba pursuing Ant Group's fine.

"We cipher that Ant Group would beryllium worthy $89 billion~ of which Alibaba's involvement is $29.4 billion~ fixed their 33% ownership successful Ant Group. We suggest specified valuation presents upside from consensus," said Yang, referring to Bloomberg's valuation of Ant Group astatine conscionable $22 cardinal to $57 billion.

"In our view, [Bloomberg's] valuation scope is excessively low, arsenic Ant Group is comparable to PayPal. With the extremity to regulatory overhang connected Ant Group, we suggest that it tin beryllium valued astatine a aggregate that is much akin to PayPal, which suggests upside to the Bloomberg valuation," said Yang.

On Saturday, Ant Group announced a stock buyback that values the institution astatine $78.53 billion, according to authorities media CGTN. This is little than Ant's $315 cardinal valuation erstwhile it tried to database successful 2020.

Kumarasiri said that the buyback "raises questions, particularly if the institution had plans for an IPO successful the adjacent future."

"The company's justification for the buyback, which includes providing liquidity to existing investors and attracting/retaining talented individuals done worker incentives, seems unnecessary if an IPO was imminent."