Alibaba slides as chairman Jack Ma announces retirement plan

Shares of Alibaba (BABA) are under pressure this morning after chairman Jack Ma announced he will step down in September 2019, with CEO Daniel Zhang taking over as chairman of the board. Commenting on the news, Jefferies analyst Karen Chan told investors that the 12-month timeframe of Ma's succession plan should enable a smooth transition with lower "key man risk." While acknowledging that shares will move lower, her peer at JPMorgan argued that Alibaba's operations should not be impacted by Ma stepping down. CHAIRMAN MA STEPPING DOWN: Alibaba announced that on September 10, 2019, CEO Daniel Zhang will succeed Jack Ma as chairman of the board of Alibaba. Ma will continue as executive chairman of the company over the next 12 months "to ensure a smooth transition of the chairmanship" to Zhang. Ma will complete his current term as a member of Alibaba's board of directors until its annual general meeting of shareholders in 2020. In a letter, Ma said in part, "I have put a lot of thought and preparation into this succession plan for ten years. I am delighted to announce the plan today thanks to the support of the Alibaba Partnership and our board of directors. I also want to offer special thanks to all Alibaba colleagues and your families, because your trust, support and our joint enterprise over the past 19 years have prepared us for this day with confidence and strength. This transition demonstrates that Alibaba has stepped up to the next level of corporate governance from a company that relies on individuals, to one built on systems of organizational excellence and a culture of talent development...As for myself, I still have lots of dreams to pursue. Those who know me know that I do not like to sit idle. I plan on continuing my role as the founding partner in the Alibaba Partnership and contribute to the work of the partnership. I also want to return to education, which excites me with so much blessing because this is what I love to do." 'SMOOTH TRANSITION': Commenting on Ma's succession plan, Jefferies' Chan told investors that she believes the 12-month timeframe and his retention of a permanent role in the Alibaba partnership should enable a smooth transition with lower "key man risk" following next year's transition. Additionally, the analyst noted that Alibaba authorized a two-year $6B share repurchase program on May 18, 2017 and has not made any repurchase as of September 7, 2018. Based on the last closing price of $162.37, the company may repurchase up to 37M shares until May 18, 2019, she contended. Chan reiterated a Buy rating and a $225 price target on the shares. Voicing a similar opinion, JPMorgan analyst Alex Yao told investors in a research note of his own that he believes Jack Ma's stepping down from the chairman role should not have a significant impact on the company's daily operations and long-term strategic planning. Nonetheless, he acknowledged that shares of Alibaba will move lower on the announcement, but added that the near-term share price movement is highly dependent on the company's fiscal 2019 core commerce and consolidated profit growth outlook during its upcoming investor day. PRICE ACTION: In late morning trading, shares of Alibaba have dropped 3.5% to $156.68.

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