Posted by Katharine TAN Pei Shi, Year 4 undergrad at the School of Accountancy, Singapore Management University
Shares in Chinese e-commerce company Alibaba crashed on Thursday as the company reported a slide in revenue growth and fended off accusations of trading in fake goods.
Alibaba suffered a 10% drop in its share price in early trading after announcing a 40% increase in revenues in the final quarter of 2014. The total, $4.22bn, missed analysts’ forecasts of $4.45bn.
Net profits for the quarter jumped to $2.1bn, above the $1.9bn estimated by 23 analysts polled by Reuters, and the company announced strong growth in mobile sales, a key metric in the world’s largest mobile market. But neither was enough to stem the sell-off.
Alibaba went public in September in the biggest initial public offering in history, raising $25bn as investors snapped up shares in China’s largest e-commerce company. The company dominates retail in China and now has 334 million annual active buyers.
Despite some wobbles, Alibaba’s shares have soared since the IPO, priced at $68. They closed at over $98 on Wednesday.
The share slide came a day after the company was forced to defend itself against accusations by Chinese authorities that it has done too little to tackle the sale of fake goods, bribery and other illegal activities.
Critics have long charged that Alibaba’s Taobao online marketplace, one of the world’s largest shopping sites with 7 million sellers offering 800 million items, is rife with fake goods.
In a report released yesterday, China’s state administration of industry and commerce said it had uncovered “the long-term existence of illegal problems regarding the management of transaction activity and other issues”.
“Illegal business exists on Alibaba Group’s trading platforms, and for a long time the company has failed to pay adequate attention and failed to take measures to stop it. This not only is the biggest crisis of integrity faced by the company since its founding, but also has hurt other internet companies that try to operate legally,” the report stated.
Alibaba hit back, accusing the regulator of bias and misconduct. In a conference call on Thursday, executive vice-chairman Joseph Tsai called the allegations “so unfair”.
Tsai said Alibaba has spent more than 1bn yuan (about $160m) over the past two years to fight fakes and was prepared to file a complaint about the report. The report was taken down Thursday.
The spat and the miss on revenue growth are not the only issues troubling investors. This week Yahoo’s chief executive Marissa Mayer announced the company would be spinning off its 15% stake in Alibaba as a separate entity.