Alibaba Attempting to Soothe Shareholders

Alibaba Attempting to Soothe Shareholders

After China’s economic woes, its slow growth in revenue and other issues promoted investors to dump Alibaba’s shares, the company decided to initiate a campaign for reassuring shareholders of its future growth prospects. On Thursday, a letter that was written to shareholders was published in which the executive chairman of the e-commerce firm, Jack Ma stated that the entire world was overreacting to the economic slowdown in China and he didn’t believe these woes would have any impact on consumption. The letter was only a small part of a complete online interactive report with chars and videos aimed at explaining the company’s strategy to investors in the Chinese market and overseas.

Mr. Mas clearly asserted that he didn’t believe consumption would be impacted by the slowdown in economic growth. He said that Western consumers could encounter trouble in maintaining their lifestyle if they couldn’t borrow, but Chinese consumers were always prepared for a crisis and have a habit of saving up. He said that online shopping provides a better value for money and convenience, which had urged numerous Chinese consumers to shop online. He stated that there was plenty of local consumption power and the key was to ignite it. This new effort sheds some light onto the difficulties faced by Alibaba in communicating with their US investors who don’t interact with their products and services.

Investors have been disappointed twice by the quarterly earnings of the company since its IPO in September 2014. First was the December quarter and second was the June one. According to analysts, the biggest risks investors face is in regard to Alibaba’s inefficiency and inexperience in Wall Street communications. The share price of Alibaba reached new lows mostly due to the worries incited by the slowdown in China’s economic growth and the effect it would have on the ecommerce company.

These concerns have also had a negative impact on Chinese companies listed in the US in various sectors including technology. Alibaba went public in 2014 and its initial public offering amounted to $25 billion. The company’s stock had been on the rise for several months and last November, it even reached a high of $120. However, since then, they had tumbled and gone below $68, its debut price. On Thursday, the shares were priced at $67.11. Last month, it was stated by Jane Penner, the investor-relations chief at Alibaba that in the quarter ending in September, the value of online transactions would be lower than expectations due to slower consumer spending.

In a New York conference, Ms. Penner said that the gross merchandise value of Alibaba would also be lower than expectations. In the letter to shareholders, Mr. Ma states that the value of transactions on its online platform is not a suitable measure for judging the performance of the company. He said that the company was planning to use its initiatives in cloud computing, big data and logistics to develop its ecommerce infrastructure. The company remains the ecommerce market leader in China, even amidst concerns.

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