Alibaba increases the size of its share repurchase programme to a new high of $25 billion.
(Reuters)-Beijing: Alibaba increased its share repurchase programme to $25 billion on Tuesday, the e-commerce giant’s biggest ever, in order to shore up its bruised shares as it battles regulatory scrutiny and fears about slowing growth.
The idea comes after Chinese Vice Premier Liu He said that Beijing would do more to stimulate the economy and make the capital markets more friendly. This led to a rise in technology stocks.
This is the second time in a year that Alibaba Group Holding Ltd. has increased its share repurchase programme. Last August, it increased the program’s budget from $10 billion to $15 billion.
The company’s stock has plummeted more than 50% in the last year.
It shows that we believe that Alibaba has a long-term, sustainable growth and wealth-creation plan that is good for the company and its shareholders.
“Alibaba’s stock price doesn’t show how valuable the company is because of our strong financial position and plans for the future.”
Alibaba’s shares increased 4.8 percent in Hong Kong on the announcement. centOn Monday, its stock fell 4.3 percent in the United States.
Alibaba’s repurchase move makes sense in light of Beijing’s anti-monopolistic behaviour and “disorderly capital development” regulations, according to Rukim Kuang, founder of Beijing-based Lens Company Research.
“Internet behemoths will begin to refocus their efforts on their core businesses in the future. As a consequence, corporations like Alibaba no longer need to maintain such enormous cash reserves, “he said.
Alibaba said at the end of December that it had $75 billion in cash, cash equivalents, and short-term investments.
When its billionaire founder, Jack Ma, spoke out against China’s regulatory system in late 2020, the business has been under fire.
Following that, authorities stopped Alibaba’s planned blockbuster IPO of its finance unit, Ant Group, and levied a record $2.8 billion punishment for anti-competitive behaviour, precipitating a lengthy decline in the company’s shares.
Growing competition, slowing demand, and a well-established e-commerce market have all hurt the company’s chances of making money.
Alibaba reported 10% year-on-year sales growth in its most recent results announcement, the company’s worst quarter since going public in 2014 and the first time growth dipped below 20%.
According to Reuters, the company is said to be ready to lay off tens of thousands of employees.
As of March 18, Alibaba said that it has repurchased about $9.2 billion of its US-listed shares under a previously announced programme that was scheduled to run through the end of the year.
The current $25 billion programme will last for two years, through March 2024.
Alibaba appointed Weijian Shan, executive chairman of investment firm PAG, as an independent director on its board of directors and announced that Borje Ekholm, CEO of Ericsson, would step down from the board on March 31.
