O Ali, Baba, O Aliiiiii baba!
Shares of Alibaba Group Hoding Ltd, which is listed in the United States (US), have never been this cheap but investors are still holding out.
According to the earnings report, Alibaba depositary receipts traded at a multiple of 18.7. It is the lowest since its debut in 2014 and the widest discount to the Nasdaq 100 index average multiple on record. ADR slipped 4% on Wednesday to a level not seen since May 2017 and its Hong Kong shares closed lower at 2.5% on Thursday.
The pullback wiped out US $ 526 billion in 13 months amid concerns over the company's prospects. Some of Alibaba’s biggest growth drivers such as fintech, data, online advertising and content are under the scrutiny of regulators in Beijing.
The company missed estimates for quarterly sales on its latest earnings update last month and forecast slower revenue growth for 2022.
There is uncertainty about the future of technology companies like Alibaba that use variable interest entities (VIEs) to circumvent foreign ownership rules and overseas listings.
Following records, the Chinese government plans to ban companies from disclosing their VIE foreign stock markets.
According to China’s securities regulatory commission on its website on Wednesday stating that media reports on the ban on overseas listings for companies using the VIE structure were untrue without providing further details.
Meanwhile, for those betting on Alibaba shares who consider it too cheap and mature for recovery continue to make a profit. Derivatives traders who had bought Alibaba options when it was bullish have given up on their bets this week and sold them in December during significant losses.
The bearish selling for the expiration period in more than two weeks was the most owned contract while the strike price of US $ 20 showed an 84% drop from Wednesday’s close.
Wall Street analysts are trying to keep up with the decline in ADRs even though they are very confident with 56 recommending a buy to one sale is the average price target for the firm has fallen for 18 consecutive weeks.
