The New York Times reported on Friday that the Alibaba Group Holding Limited (NYSE: BABA) co-founder and executive chairman, Jack Ma is planning to step down as the Chairman of the Chinese e-commerce firm on Monday the 10th of September to carry out philanthropy in education. This move will reflect a dramatic change of management for the $420 billion high-tech company.
Jack Ma’s retirement and Alibaba Group’s clarification
Ma, an unpretentious salesman, and mesmerizing leader co-founded Alibaba along with seventeen others, including some of his former students, out of his flat in Hangzhou in eastern Zhejiang province in 1999.
A former English tutor, Ma developed Alibaba into one of the world’s most innovative e-commerce and digital payments enterprises, reshaping how Chinese people buy and pay for merchandise. Amazing success bolstered his net worth to over $40 billion, effectively making him China’s wealthiest man.
Ma resigned as Alibaba’s CEO in 2013. The company’s current CEO is Daniel Zhang, who is a contender to replace Ma. Ma continues to appear as the face of the online retail firm, and also a proponent of its long-term plan. According to securities filings, Ma has a 6.4% stake, but due to the firm’s complex legal structure, he has greater authority.
Alibaba commenced operation as an online marketplace for companies to sell their goods to other firms, however, it did not see any success until it opened the Taobao marketplace in 2003, which traders used to sell goods directly to the public.
Alibaba later introduced Alipay, an online payment service, to enable transactions in a country where few people have credit cards. Alipay later became Ant Financial, the financial company controlled by Ma.
Today, Alibaba’s business empire covers e-commerce, cloud computing, digital media and entertainment, online banking, and also a corporate instant messaging service comparable to Slack.
Alibaba also owns stakes in some of China’s most influential media assets, including Weibo, a Twitter-like social media platform, and the Hong Kong-based English tabloid “The South China Morning Post.”
Alibaba reported approximately $40 billion in sales last year, and in the latest quarter, the company reported about $10 million in e-commerce revenue. The company moreover stated that its annual active customer base hit 524 million.
The establishment has strengthened its presence outside China by investing in numerous e-commerce and online finance companies in India and Southeast Asia, but its efforts to migrate to the United States have largely failed.
Despite meeting President Donald Trump in early 2017 and pledging to bring one million jobs to America, the government turned down Ant Financial’s proposal to buy the money transfer company, Money Gram, earlier this year due to concerns over national security.
It is believed that Ma is resigning because of his earlier opinion that China’s regulatory environment is deteriorating, with Beijing and state-owned enterprises progressively playing more authoritarian roles with businesses.
He is known to have stated that “companies should be in love with the government but never get married to each other,” indicating that an arm–length distance engagement is always ideal.
Under President Xi Jinping, China’s internet sector has grown and become even more proliferate, prompting authorities to toughen its stance. The Chinese economy is also experiencing sluggish growth and rising debt, and the nation is mired in a deteriorating trade war with the United States.
Duncan Clark, author of the book “Alibaba: The House Jack Ma Built,” said the following about Ma: “He’s a symbol of the health of China’s private sector and how high they can fly whether he likes it or not. His retirement will be interpreted as frustration or concern whether he likes it or not.”
In an interview, Ma opined that his retirement should not be construed as an end of an era but rather “the beginning of an era,” and further stated that he would be spending much more of his time and fortune on teaching. “I love education,” he said. Watch the interview here:
At a conference last November, Ma sounded more optimistic. He said: “there’s no country like China in the world.” With political stability, social safety, and 6% plus economic growth, we have the best business environment.”
Ma, who turns fifty-four today, will probably remain on Alibaba’s board of directors and simply continue to guide the company’s management. Ironically, the country celebrates teacher’s day today. It is rare to see Chinese business tycoons resign in their fifties.
The South China Morning Post, in which Alibaba owns a stake, has clarified that he is not going to step down today but will unveil succession plans. Still, the announcement is apt to create jitters in the Chinese tech industry as the industry is under tremendous pressure following allegations of rape against Richard Liu, JD.com’s CEO. The US police have already opened an inquiry into the claims, which Liu has denied through his attorney.
Technically, the stock has broken below its 50-day moving average. Additionally, the MACD indicator is declining below the reading of zero, so the possibility of a further decline in the stock price is higher.
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