Alibaba Group Holding Ltd CEO To Staff: Forget The Stock Price Slide

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Shares of Alibaba fell below their IPO price for the first time on Monday amid global stock market selloff. The ‘Black Monday‘ even spooked employees of the Chinese e-commerce giant, and prompted Alibaba CEO Daniel Zhang to send out a damage-control letter reassuring staffers of a rebound. Alibaba shares plunged 3.5% to $65.80 on Monday. In September 2014, the company had priced its shares at $68 in a historic IPO, raising $25 billion.

Focus on serving customers, says Zhang

“Forget about the stock price and put your mind at peace,” Zhang said in a letter to employees on Tuesday. He urged the company’s 35,000 employees to broaden the horizons “to see the bigger picture.” According to the South China Morning Post, Daniel Zhang asked employees to focus on serving customers. He told them that Alibaba had robust cash flow, plenty of cash, and a profitable business model.

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Alibaba shares rose to as high as $120 in November. The recent decline highlights how much the investor sentiment has changed for Alibaba and Chinese stocks since last year. However, CLSA analyst Elinor Leung said the decline in Alibaba’s stock price reflected wider concerns about the Chinese economy rather than issues specific to Alibaba.

Why were Alibaba employees so concerned about its stock price? Because they own a large chunk of the company’s shares. Staffers held an estimated $41 billion worth of the e-commerce giant’s shares when it went public last year. Alibaba shares jumped 4.17% to $68.54 on Tuesday.

Alibaba facing business challenges

The e-commerce giant is also facing business challenges in China. Even though the Jack Ma-led company dominates Chinese online retail market with 80% share, smaller rivals like JD.com and other are giving it some tough competition. Moreover, a slowing Chinese economy could affect consumer spending, which may adversely affect Alibaba’s sales growth.

Earlier this month, the company reported June quarter revenue that fell short of Wall Street expectations. Analysts on average were expecting $3.39 billion in revenue, but Alibaba’s revenue rose only 28% YoY to $3.26 billion.

Alibaba shares inched up 0.82% to $69.11 in pre-market trading Wednesday.

 

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