There’s still ten days until the anniversary of Alibaba’s record breaking $25 billion USD NYSE IPO, but the honeymoon is well and truly over.
The e-commerce giant is now grappling with a slowing Chinese economy. Shares slumped again today to an all time low of $60.45 USD following the announcement that second-quarter sales would fall below expectations.
The company now expects their gross merchandise volume to fall in the “mid-single digits lower” range. Currently their shares are sitting at 89% of their original IPO price, falling from a peak of over 175% in November.
“[Alibaba is] observing some negative impact to the magnitude of spending,” said the head of Alibaba’s investor relations, Jane Penner at a conference in New York on Tuesday. Penner claimed that overall engagement had remained high on the company’s e-commerce platforms, but that elements including average order values has dropped.
The stock tumble comes just days after chairman Jack Ma and Vice Chairman Joseph Tsai sought to borrow $2 billion USD from a series of American Banks, using Alibaba stock as collateral. It’s expected the money will be reinvested through the family office fund Blue Pool Capital Ltd., established by Tsai earlier this year. Ma and Tsai own approximately 7.1% and 3.1% of Alibaba Group stock respectively. Their year-long lockup period ends on September 21, though they have both committed to keeping their shares at this point.
Alibaba isn’t the only company suffering from a slowdown in Chinese retail. Baidu, another of the country’s top three internet companies, saw their stock tumble in July following lower than expected earnings. The company said the revenue dip was due to large investments in the O2O sector. CFO Xinzhe li said at the time that increased competition meant they would have to “double down” on investment in order to stake a market share.
A series of tech companies across a range of industries have been experiencing sales setbacks this year, signaling that retail is not immune to China’s greater economic slowdown. Last month one of China’s most entrenched global tech brands, Lenovo, cut 10% of their white collar work force, hoping to trim $1.3 billion USD from the company’s annual spend. Internet company Sina saw an 8% drop in advertising as local brands reigned in their marketing spend, while smartphone giant Xiaomi is also looking to miss its goal sales volume in 2015.
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