About Alibaba Group Holding - ADR
Alibaba is the world’s largest online and mobile commerce business, specialising in e-commerce, retail, internet, and technology products, providing business-to-business (B2B), business-to-consumer (B2C), and customer-to-customer (C2C) sales services. It was founded on 28 June 1999 by Jack Ma along with 17 of his friends and students. Its headquarters are in Hangzhou, China.
Spanning three websites – Taobao, Tmall and Alibaba.com – it has become the dominant e-commerce force in China, with an 80% market share.
The company’s mission was to improve the domestic e-commerce market, create a reliable platform for business enterprises, and improve the exportation of Chinese products to global markets. Its founder Jack Ma is now one of the world’s richest people with a reported net worth of $42.3bn in 2021.
What does the company offer?
Alibaba.com and its consumer-focused sister site Aliexpress.com sell and export a vast array of products to businesses and consumers across the globe. The group also owns Taobao.com, a customer-to-customer platform, which allows small businesses and entrepreneurs to open a digital storefront from which to sell their own products, and Tmall.com, an offshoot of Taobao.com that allows Chinese and international retailers to sell branded goods to greater China.
In 2003, the company launched Alipay, a third-party online and mobile payment system, allowing customers to make purchases easily on Alibaba-owned sites. Alipay is now accepted by more than 460,000 businesses. In 2013, Alipay overtook PayPal as the world’s largest mobile payment platform, with over 870 million registered users of the system.
In recent years, the company has broken into the world of cloud computing and artificial intelligence (AI) technologies. Alibaba Cloud was launched in 2009, as a cloud computing platform for the use of e-commerce data mining and processing. In 2019, it unveiled the Hanguang 800 AI accelerator, a device to increase the speed of computer learning and AI, with reports suggesting that it can boost computing performance to 78,563 images per second. Developers can rent Hanguang 800 access on the company’s cloud-computing system.
The company also offers several other consumer-based products, including internet and entertainment services, as well as sports divisions (AliSports) and a business-to-customer pharmacy platform (AliHealth).
This ever-expanding company has seen huge growth in revenue over the past decade. For the 2011 fiscal year, the company reported revenue of $1,777 (Millions of US $), whereas in 2021 it reported revenue of $109.48bn.
Customer numbers also continue to grow. In Q4 of 2021, the company reported 882 million active consumers, which represented a quarterly net increase of 19 million.
As the customer base expands, so does the company’s workforce. In 2018, the company registered 66,421 employees; by 2021 this number had soared to 258,578. It has 15 locations in total, spread throughout China, Hong Kong, the US, Japan, Korea, Taiwan, Australia, and several European countries.
What are some key events that have taken place?
In 2005, American company Yahoo! invested in the company by way of a variable interest entity, purchasing a 40% stake for $1bn.
In 2014, the company raised $25bn for its initial public offering (IPO) on the New York Stock Exchange, which gave the company a market value of $231bn. This was one of the largest IPOs in history, and in 2018 it became only the second Asian company to break the $500bn valuation mark.
In China, 11 November is known as Singles’ Day. Although the day’s origins have nothing to do with commerce, Alibaba popularised it as a shopping event, similar to Black Friday in the west.
It has consistently beaten its own records with Singles’ Day events, in 2021, the company took $84.54bn (USD) gross merchandise volume, a substantial increase from 2020s $74.1bn (USD)
How does the company make money?
The company’s business-to-business platform generates revenue by charging transaction commissions and by charging sellers a fee for their digital storefront. Taobao, the group’s customer-to-customer site, doesn’t charge sellers a fee but instead charges for advertising placements in much the same way as Google generates income from its advertising platform.
Tmall.com is slightly different, as it profits from all three of the above-mentioned methods: it charges sellers annual fees for a digital storefront, there are commission fees on transactions, and it also drives revenue through advertising opportunities.
BABA stock overview
The company’s stock is listed on the Nasdaq and the London Stock Exchange (LSE) under the ticker symbol BABA. The Alibaba stock price declined from Nov 2014 to September 2015, when it hit its all-time low of $59.24 per share.
After several months of volatility, the BABA share price began a sharp increase in value, rising to $208 per share in June 2018. The stock price began its next and most formidable rally in December 2018, when it climbed to its all-time high of $317.14 per share in October 2020.
Recently, Alibaba stock has been negatively impacted by the Chinese government’s clampdown on tech companies, with regulators intervening on issues such as competition and data handling. These new regulations were brought in after the failed IPO by Ant Group (under the moniker Alipay), which resulted in a 45% drop in value for Alibaba shares in August 2021, bringing them back down to pre-pandemic levels.
When did Alibaba stock split?
Since going public in 2014, there has been no agreement to a stock split, despite the company’s shares rising in value considerably. However, Alibaba Hong Kong stock (OTC), listed under the ticker BABAF on the territory’s main exchange, underwent a stock split in 2019, with a ratio of 8 to 1. This split resulted in BABAF stocks being traded 2% higher than BABA stocks. This is possibly due to more investors, especially retail investors with smaller portfolios, finding the value of the Hong Kong-listed stock more attractive.
Because of the positive impact the stock split had on Alibaba’s Hong Kong shares, it is possible that the New York-listed BABA entity may go down a similar path in the future.
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