Alibaba (NYSE:BABA) cannot catch a break from the eyes of the Chinese Communist Party. Last week, China pressured the firm to divest its 5% holding in Mango Excellent Media, a unit of state-run Hunan TV. Alibaba will net $600 million from the sale, 38% below what it paid in Dec. 2020.
Why?
Ever since Founder Jack Ma openly criticized the government about finance, the government responded. It did not allow Alibaba’s Ant Financial unit to list publicly. It fined the firm billions for monopolistic behavior. More recently, Alibaba contributed around $15 billion over five years for China’s common prosperity drive. None of those actions softened the backlash from the government.
Investors are growing tired of Alibaba at the crosshairs. The government is determined to spread the wealth of overly rich firms into the hands of the common people. Alibaba is one of many firms too big and too rich. Such firms are not fashionably fit for China’s new direction.
Investors who thought Alibaba would face no more regulatory risks are wrong. China introduced new data privacy rules, the restrictions on gambling and computer gaming online for children, and the restructuring of non-profit online schools.
Alibaba will have a tough time growing as fast as it did. Its customers in retail and corporate will also spend less, hurting Alibaba’s business.