[HONG KONG] Alibaba Group Holding Ltd will buy back as much as US$4 billion of stock as it tries to revive a share price battered by concerns about the slowing Chinese economy less than a year after going public.
The e-commerce operator will buy the shares over a two-year period, mainly to offset dilutions such as from its compensation programs, according to a statement Wednesday. The announcement came as the company posted first-quarter sales that rose at the slowest pace in at least three years.
Alibaba's plunge in market value of about US$100 billion, a decline bigger than Goldman Sachs Group Inc, since November has been driven by a Chinese economy expanding at the weakest rate since 1990 and lawsuits concerning sales of counterfeit goods. The company's revenue in the three months ended June rose 28 per cent to 20.2 billion yuan (US$3.2 billion), down from an average of 56 per cent in the previous 12 quarters.
"Online shopping in larger cities in China has already reached saturation," Li Muzhi, a Hong Kong-based analyst at Arete Research Service LLP, said by phone before the earnings.
"Alibaba needs to invest in new areas to search for other avenues of growth."
Alibaba closed at US$77.34 in New York on Tuesday. While the shares have never traded below the US$68 paid in September's initial public offering that raised a record US$25 billion, they have fallen 35 per cent from November's record close of US$119.15.
Alibaba is being squeezed by price cuts and competition in China's bigger cities, a shift to shopping on smartphones that generates less advertising revenue and the country's slowest economic growth since 1990.
That hasn't dulled billionaire Chairman Jack Ma's appetite for expansion. On Monday, he announced a US$4.6 billion investment in Suning Commerce Group Co to get more access to the electronics retailer's network amid intensifying competition from online shopping site JD.com Inc.
"Online shopping in larger cities in China has already reached saturation," Li Muzhi, a Hong Kong-based analyst at Arete Research Service LLP, said by phone before the earnings. "Alibaba is also providing heavy discounts on its group-buying site to win market share."