Alibaba’s Reaction To Share Slump

The drop in Alibaba’s stock prices might paint a bleak picture for its investors and employees, but Alibaba CEO Daniel Zhang is bullish on the company’s resilience.

In an open letter, Zhang said that the company was cushioned by enough cash reserves and plenty of cash flow to keep things under control.

“Do not let the fog cloud your vision; broaden your horizons to see the bigger picture,” Zhang wrote in the letter issued Tuesday (Aug. 25), The Wall Street Journal reported. “Forget about the stock price and put your mind at peace.”

Employees must continue to focus on serving customers without worrying, as the company has enough savings, a profitable business model and trust in the Chinese economy to help things get back on track, he added.

The letter was sent out a day after the company’s stock fell below $68 for the first time, which was the company’s IPO price. With a 3.5 percent depreciation, the Chinese eCommerce giant reportedly lost over $5 billion in market value.

The loss in stock value comes as the company continues to face stiff competition from the various business ventures of Tencent Holdings and China’s second-largest eCommerce company, among several others.

A peek into Alibaba’s slowdown could be observed in the company’s earnings report. The devaluation of Chinese currency and the falling spending power of Chinese consumers could be pointed to as the reasons for the slowdown of the giant’s growth engine.

Counting all these factors weighing down its speed of growth, the company reported its slowest quarterly growth in three years earlier this month.

Alibaba, however, continued to be optimistic about its customers’ spending power, which it said tends to bring in business all throughout the year.

While it remains to be seen how resilient Alibaba’s business model is, some of the other Chinese social commerce companies reportedly saw a hefty slump in stock value, with Weibo falling 20 percent and Baidu 7.7 percent.

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The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.

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