Jack Ma video reappearance fails to soothe all investor concerns

Alibaba Group鈥檚 Jack Ma
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  • Ma had not appeared in public since Oct. 24, after he blasted China鈥檚 regulatory system
  • Chinese regulators have set about reining in Ma鈥檚 financial and e-commerce empires

HONG KONG: Billionaire Jack Ma鈥檚 50-second video reappearance has done little to resolve Alibaba Group鈥檚 troubled relationship with regulators that is making some investors hesitate about owning the Chinese e-commerce giant鈥檚 stock.

Relief at Ma鈥檚 first public appearance added $58 billion in market value on Wednesday as Alibaba鈥檚 Hong Kong-listed stock soared, though doubts crept in a day later and the stock fell more than 3 percent as the broader market steadied near two-year highs.

Ma had not appeared in public since Oct. 24, when he blasted China鈥檚 regulatory system. That set him on a collision course with officials and led to the suspension of Alibaba fintech affiliate Ant Group鈥檚 blockbuster $37 billion IPO.

A source familiar with the matter said Ma cleared his schedule late last year to keep a low profile, prompting discussion at Alibaba about when and how he should reappear to assure investors.

It was decided he should do something that would appear as part of his normal routine, rather than anything overt that could irk the government.

While Ma has stepped down from corporate positions, he retains significant influence over Alibaba and Ant, and the regulatory crackdown on his business empire coupled with his absence was a concern for some investors.

There was skepticism that Ma鈥檚 brief reappearance meant all was well with his businesses.

鈥淭he coast is not all clear for Alibaba and it is a judgment call whether you believe the company can still thrive in the changing environment,鈥� said Dave Wang, a portfolio manager at Singapore鈥檚 Nuvest Captial, which owns Alibaba stock.

鈥淲ithout some skepticism, the price would be a lot higher,鈥� he said, adding his firm had increased exposure to China and with it Alibaba, which he believes can prosper over the medium to longer term.

Two of the company鈥檚 investors in the US who have sold out or reduced positions in Alibaba said they needed more reassurance about the company and the regulatory environment before reconsidering the stock.

鈥淥ne of our top criteria is leadership and we were investing in Alibaba because I really respect Jack Ma as a leader,鈥� said William Huston, founder and director of institutional services at independent investment advisory firm Bay Street Capital Holdings in Palo Alto, CA, with assets under management of $86 million.

鈥淲e all know that just because he showed up ... doesn鈥檛 necessarily explain what is going on.鈥�

Huston, whose firm cut its holding in the Chinese firm last year from 8 percent of its portfolio to less than 1 percent, said the halting of the Ant IPO in November had caused uncertainty, and that Alibaba was 鈥渘ot a prudent investment鈥� for it going forward.

David Kotok, chairman and chief investment officer at Cumberland Advisers, Florida, which has about $4 billion in assets, said he held Alibaba last year but also sold as the Ant IPO was pulled.

鈥淲hen you don鈥檛 know what to do in an evolving situation like this you can鈥檛 use traditional securities analytics to reach decisions. We are standing aside and watching,鈥� Kotok said.

Chinese regulators have set about reining in Ma鈥檚 financial and e-commerce empires since the Ant IPO suspension, which has weighed on its stock that remains below levels prior to the cancelation of the Ant IPO.

鈥淲hat his actual state is will be completely up to Beijing to reveal to us,鈥� Leland Miller, CEO of US-based consultancy China Beige Book.

鈥淲hat we do know is whether Jack is running around, Jack is hiding or something else, Alibaba is not in the clear. There is a lot more of the story still to see.鈥�

Some investors are, however, betting on long-term potential for Alibaba in the world鈥檚 second-largest economy.

Dennis Dick, a proprietary trader at Bright Trading, who holds Alibaba shares, said he had protected against a potential fall when speculation about Ma鈥檚 whereabouts began by buying put options.

He covered those puts earlier in January on a report that Ma was OK and retains a long position in the stock.

鈥淲e have been investors for many years ... there鈥檚 a very strong team of executives and Alibaba is bigger than just one person,鈥� said a Hong Kong based long-only investor, declining to be named as he was not authorized to speak to the media.