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Alibaba stock tumbles after China denies Ant Group IPO revival

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Yahoo Finance Live anchors discuss the dip in stock for Alibaba after China denies the Ant Group’s IPO revival.

Video Transcript

AKIKO FUJITA: Here's another thing I'm watching today. Shares of Alibaba were trading lower after Chinese financial regulators denied a report from Bloomberg this morning regarding plans to revive Jack Ma's Ant Group's IPO. Now remember Ant had originally planned a record $37 billion IPO in Shanghai and Hong Kong. That was back in November of 2020.

But Chinese regulators halted the deal just a few days before, this coming after Jack Ma publicly criticized regulators. China Securities and Regulatory Commission did say it supports eligible platform companies to list overseas, according to a statement. And Alibaba moving because it does own roughly one-third of Ant. Now a bit of a whipsaw that we saw in terms of the stocks via that report this morning--

BRIAN CHEUNG: That's putting it lightly.

AKIKO FUJITA: --from Bloomberg saying that they had begun initial discussions to potentially allow for this IPO to move forward. And then pretty quickly, the regulators put out a statement saying, well, that's not the case. That hasn't been finalized. What's interesting about this is a lot of investors are watching this to see what the regulatory environment is like in China for these big tech names.

If you remember, back in November 2020, this was kind of that first hammer that was placed here from regulators who were cracking down on the IPO. Since then, we've gotten other crackdowns, including Didi, which, by the way, reportedly is going to delist, officially delist tomorrow, at least according to the Nikkei. So I think a lot of investors are kind of looking at this to say, well, is that crackdown finally coming to an end? And is it safe to put your money behind some of these big tech names or big Chinese tech names?

BRIAN CHEUNG: I think what we've learned though, is that the crackdown and the speculation over when the crackdown will end or if it ever will end is completely moot because it seems like you're swinging on the day by day basis because in a matter of hours, you can get excited about an IPO like for Ant, and then a few hours later, the Chinese regulatory authorities will just pull the rug out from under you.

I mean, this has been-- the whole game that we've been covering in terms of this space of Chinese companies trying to list, not just in the United States, but anywhere overseas, has been, it's on, it's off. It's on, it's off. It's on, its off. And I think that if you're an investor in these companies, no wonder the stock prices are so volatile in that they've been going down irrespective of the overall macro story that we've been seeing in equities. But it's just the regulatory aspect of the risk that you're taking on when you invest in these ADRs is so remarkable.

One other point, though, to notice is that Didi, very interesting to see that, actually, the stock's up roughly 40% since they made the announcement of the delisting. So in principle, it's not necessarily binary that while if you're delisting, it's bad per se. I mean, that would just-- anything that can offer more clarity in terms of, like, where these ADRs are going to be trading is probably something net positive for investors that have been through this ride.

AKIKO FUJITA: Well, and we saw these Chinese tech stocks move earlier this week on reports that this investigation that regulators have been carrying out against Didi are reportedly coming to a close, that Didi may finally be able to relist their app in the app stores. And so that was sort of the thinking, you know, that helped Didi shares. It helped other Chinese shares as well.

But to your point, we really don't know at the end of the day what's happening among Chinese regulators. I think the argument for a bit of a cooldown in this crackdown would be that things are starting to slow down in China. And these have been some of the big growth names that have led to-- that have helped drive the economy there. So is this a time for regulators to see what's happening in the broader macro picture and say, well, maybe we need to back off just a bit in this environment?

BRIAN CHEUNG: Yeah, and again, in principle, important to note that the Chinese regulators did say alongside their clarification on the Ant IPO situation this morning that they're OK with eligible platform firms raising money offshore. Now, of course, they're not specifically speaking to any individual company. But in essence, I mean, that could be a broad policy stance. Of course, don't want to read into it too much.

AKIKO FUJITA: Well, the thinking is that it's smaller and medium sized companies that will get the green light, not--

BRIAN CHEUNG: Smaller. Right, not--

AKIKO FUJITA: Smaller, not the big names like Ant.

BRIAN CHEUNG: Yeah, yeah, so certainly something worth watching in the future.

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