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Alibaba’s Post-IPO Blues

What a difference a year makes. After a much lauded public debut via initial public offering only several months ago, Alibaba is trading at “busted IPO” levels (below the IPO). And, The Wall Street Journal reported Monday (Sept. 7), the company will have to grab more money from its customers who are quickly making the switch to eCommerce over mobile devices.

In a brief synopsis on how things have gone since last September, WSJ pointed out that the stock had leaped 38 percent on its first trading day and reached its zenith roughly two months later, 75 percent above the debut. The road has been rocky since then, with regulatory disputes, the vagaries of earnings season and the unlocking (and subsequent selling) of large blocks of shares via management.

More recently comes the news that Jack Ma, chairman, and Joe Tsai, vice chairman, are looking to borrow $2 billion using the stock as a form of collateral. Oh, and there’s also the worries about China’s slowing growth.

In reference to the overall economy, WSJ states, fears are misplaced. There’s still strength in eCommerce. Noting the “healthy pace” that has marked the total number of goods sold across the company’s online platform, WSJ pointed to 34 percent growth year over year in the June quarter, albeit a slowdown from the previous 45 percent rate. But that may be trumped by the relatively lower 28 percent sales growth that shows a more rapid slowdown than has been seen in the gross merchandise volume and below the 30 percent to 35 percent rate that had been used as a yardstick by the Street to underpin the IPO price. A mixed bag has contributed to the revenue growth slowdown, such as a lack of (previously lucrative) lottery ticket sales.

But it is the shift to mobile that has been more fundamental, according to WSJ. Alibaba monetizes those transactions at a rate that is less than its “traditional” business. And, as Alibaba makes its sales on Taobao, its biggest ad platform, the mobile “take rate” is lower, at about 2.2 percent, versus 2.6 percent, roughly, for PCs. Management has contended that that gap should close, and if the mobile take rate exceeds that of the PC, it would give a boost to the stock, igniting revenue growth to be faster than merchandise growth.

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