Alibaba (BABA) Gets a Record $2.8 Billion Anti-Monopoly Fine, Shares Soar as a 'Major Overhang' is Lifted

April 12, 2021 6:23 AM EDT

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Shares of the Chinese e-commerce titan Alibaba (NYSE: BABA) closed today’s trading session in Hong Kong over 6.5% higher after the regulators issued a record fine of 18.23 billion yuan ($2.8 billion) for breaching anti-monopoly rules and regulations.

Shares rallied as the fine marked an end to an anti-monopoly investigation that lingered over the BABA price action in the recent weeks and months. The fine represents about 4% of Alibaba's annual revenue.

The company has accepted a fine and have no plans of challenging the decision, according to the executive vice chairman Joe Tsai. In addition to a record fine, regulators requested BABA to file self-examination and compliance reports for three years.

“They are affirming our business model. We feel comfortable that there’s nothing wrong with our fundamental business model as a platform company.”

“We are pleased that we are able to put this matter behind us,” Tsai said.

Alibaba became a subject of an anti-monopoly probe in December as regulators focused on practices that the company uses to force merchants to list their products on one of two e-commerce platforms.

Alibaba practices were hampering competition and posing risks for “legitimate rights and interests of consumers.”

“Despite the record fine amount, we think this should lift a major overhang on BABA and shift the market’s focus back to fundamentals,” Morgan Stanley analysts said in a note.

Similarly, Everbright Sun Hung Kai analyst Kenny Ng believes that investors are breathing a sigh of relief.

“Now the penalty is determined, the market’s uncertainty about Alibaba will be reduced. Alibaba’s stock price has lagged behind the overall emerging economy stocks for some time in the past. The implementation of this penalty is expected to allow Alibaba’s stock price to regain market attention,” he said.

The company said it is now expecting a material impact on the company. Moreover, the company will work to introduce new measures to lower the entry barriers and costs for businesses and merchants on the platform.

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