Alibaba increases share buyback to $33.9 billion from $20.4 billion

The current programme will be effective for a two-year period through March 2024. PHOTO: REUTERS

BENGALURU (REUTERS) - Alibaba Group Holding raised its share buyback programme to US$25 billion (S$33.9 billion) on Tuesday (March 22), the largest ever repurchase plan by the e-commerce giant, to prop up its battered shares as it fights off regulatory scrutiny and concerns about slowing growth.

The plan comes amid a tech stock rally in the past few days after Chinese Vice Premier Liu He said that Beijing will roll out more measures to boost the economy as well as favourable policy steps for capital markets.

This is the second time Alibaba has expanded its buyback programme in a year. It had hiked the programme from US$10 billion to US$15 billion last August.

Shares of the company have cratered more than 50 per cent in the past year. Alibaba’s shares rose 4.8 per cent in Hong Kong after the news.

“The upsized share buyback underscores our confidence in Alibaba’s long-term, sustainable growth potential and value creation,” Deputy chief financial officer Toby Xu said.

“Alibaba’s stock price does not fairly reflect the company’s value given our robust financial health and expansion plans.”

Alibaba’s buyback decision makes sense given how Beijing’s measures against monopolistic behaviour and the “disorderly expansion of capital” will limit its opportunities for new investments, said Rukim Kuang, founder of Lens Company Research.

“Internet giants will start to re-focus on their main business in the future. As a result, it’s not necessary for companies like Alibaba to keep such large amounts of cash on their books,” he added.

Alibaba said it had US$75 billion in cash, cash equivalent and short term investments as of end-December.

The company has been under pressure since late 2020 when its billionaire founder, Jack Ma, publicly criticised China’s regulatory system.

Authorities subsequently halted the planned blockbuster IPO of its financial arm Ant Group and slapped Alibaba with a record US$2.8 billion fine for anti-competitive behaviour, triggering a long slide in its shares.

Growing competition from rivals, slowing consumption, and a maturing e-commerce market have also hit its performance.

In its last earnings release, Alibaba posted a 10 per cent year-on-year revenue growth, its slowest quarter since going public in 2014 and the first time growth fell below 20 per cent.

The company is currently preparing to lay off tens of thousands of staff, Reuters reported in March.

Alibaba said it had re-purchased about US$9.2 billion of its US-listed shares as of March 18 under its previously announced programme, which was slated to last until the end of this year.

The current US$25 billion programme will be effective for a two-year period through March 2024.

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