Alibaba has gone on the offensive against a report that forecasts dismal prospects for the Chinese internet giant, with predictions that its stock price will plunge 50 percent and suggestions that its numbers are unverifiable.
Barron's published the damaging article over the weekend, pointing to intensifying competition in the e-commerce market and China's bleak economic landscape as key reasons for Alibaba's dismal outlook. It also highlighted a "seeming improbability" of growth numbers reported by the Chinese company over the past three fiscal years, ended March.
Citing JCapital Research, the report noted that Alibaba's growth numbers had "broken free of verifiable reality" and were not aligned with the Chinese government's overall figures on retail sales, consumer spending, or e-commerce.
Alibaba issued a sharp retort, accusing Barron's of publishing a report that lacked "integrity, professionalism and fair play". It said the forecasts were based on incorrect calculations, for instance, comparing Alibaba's stock performance to eBay's when the latter did not have operations in China. It added that a fairer comparison would look at Alibaba's Chinese competitors such as Tencent and Baidu, which showed similar growth rates.
Alibaba also refuted suggestions that its numbers were inflated and that its shareholders had only "virtual ownership" of the business.
"These statements are misleading," said Jim Wilkinson, the company's senior vice president of international corporate affairs. "Alibaba shareholders own shares in a holding company that holds 100 percent equity stakes in its Chinese operating subsidiaries." It added that 86 percent of revenues of its fiscal year 2015 were generated through 95 percent of the company's assets that were held in these subsidiaries.
The Barron's article also questioned the actions of founder and chairman Jack Ma, suggesting he was moving corporate funds to support private investments. It pointed to a 2014 investment in Wasu Media as well as Ma's 40 percent controlling stake in three investment funds established by a company he founded, called Yunfeng Capital. These funds were stated as co-investors with Alibaba in a number of investments.
Ma also "quietly transferred" the ownership of mobile and e-payment unit, Alipay, out of Alibaba and into a separate private partnership controlled by Ma. This, the report said, removed Alibaba's rights to Alipay's earnings.
Alibaba said this was done to meet licensing requirements by Chinese banking regulations, mandating non-bank payment processors to be domestically owned. Barron's described the explanation as "somewhat flimsy" since Alipay was domestically owned, both before and after the transfer.
In its response, Alibaba said Ma had publicly announced plans to reduce his shareholding percentage in Alipay's holding company so that it would not exceed his shareholding in Alibaba Group. "This reduction will be effected in a manner by which neither Jack Ma nor any of his affiliates would receive any economic benefit," Wilkinson said in the statement.
He added that Ma would not personally benefit from related party transactions, including his 40 percent stake in Yunfeng Capital, and the transaction with Wasu Media.