Alibaba's Future Hangs In Balance As Shares Drop 75% From 2020 High And Cloud IPO Cancellation

The future of Alibaba Group Holding Ltd BABA hangs in the balance as the company grapples with a plummeting share price and the withdrawal of its cloud unit’s IPO.

What Happened: Alibaba’s shares have sunk below $77, a drastic 75% fall from its $300 value in 2020. The tech giant also had to pay a $2.8 billion fine in 2021 for alleged monopolistic practices imposed by the Chinese government, according to a CNBC report.

In November, Alibaba retracted its plan for a public listing of its cloud computing segment, anticipated to capitalize on artificial intelligence growth. Consequently, the company’s U.S. market value has dipped below its e-commerce competitor PDD Holdings Inc PDD.

Duncan Clark, chairman of BDA, a Beijing-based investment advisory firm, attributes Alibaba’s struggles to “deep internal issues,” highlighting the company’s declining market position and internal management turmoil.

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Although Alibaba’s cloud business was once the biggest player in China’s cloud market, research firm Canalys projects a gradual uptick in Huawei Technologies Co.‘s market share, potentially jeopardizing Alibaba’s dominance.

Alibaba’s IPO market challenges are not limited to its cloud computing unit. Despite plans to list its Cainiao logistics business and Freshippo grocery store chain, the current IPO market remains challenging, particularly for Chinese firms seeking to list overseas.

Why It Matters: Alibaba’s current predicament follows significant leadership changes, including CEO Eddie Wu taking over the primary e-commerce business amid slowing growth concerns. The company also faced a billion yuan fine due to monopolistic practices, contributing to its share price plunge.

Additionally, the expected AI-driven boom in cloud services spending in China did not materialize, affecting Alibaba’s cloud business, which had reported a modest 2% YoY revenue growth for the quarter ending Sept. 30.

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