Fundamentals more important than sentiment: CEO
Alibaba Group, China's leading e-commerce firm, on Tuesday urged its employees to focus on clients rather than stock prices after shares in the company fell below its IPO price for the first time on Monday.
Shares in New York-listed Alibaba fell by 3.5 percent to $65.8 on Monday, down from its IPO price of $68. The company's shares had earlier hit a record high of $119.15 in November 2014, following its debut in September.
"Alibaba's value lies in what we create for clients, and it will not change despite fluctuations in the share price," Zhang Yong, CEO of Alibaba, wrote in an open letter to employees published Tuesday.
Zhang called on Alibaba's employees to focus on clients instead of stock markets.
"Forget about stock prices," he said.
He also noted that Alibaba has more than 100 billion yuan ($15.6 billion) in cash reserves, as well as robust cash flows and profitability.
"We have confidence in China's economy, our team and business partners," Zhang wrote.
Alibaba's stock price fall came amid a market sell-off that spread from -China to other major equity markets on Monday. A Bloomberg gauge of the most-traded Chinese companies listed in the U.S. fell 5.7 percent to a 17-month low on Monday, the news agency said.
"US investors have concerns that China's weakening economy will drag down the business performance of U.S.-listed companies that have extensive exposure to China," Shen Meng, director of investment banking firm Chanson & Co, told the Global Times Tuesday.
The pessimism surrounding U.S.-listed Chinese stocks has even infected some Internet companies that are seeing robust business growth.
Shares in social networking app Weibo plunged by 20.19 percent to $9.67 on Monday, the biggest decline since its U.S. debut in April 2014. But the company's revenue surged by 39 percent year-on-year to $107.8 million in the second quarter of this year, above market estimates.
"The fall in the share prices is mainly due to market panic rather than business performance," Zhang Xiang, an analyst with ChinaVenture Investment Consulting, told the Global Times Tuesday.
A batch of U.S.-listed Chinese firms have announced plans to go private as a preliminary move before re-listing in China, analysts said.
Various factors have encouraged Chinese tech companies that are listed in the U.S. to return home, including the boom in the mainland stock market earlier in the year, high valuations of tech firms in Shenzhen's NASDAQ-style ChiNext board, and China's support for mass entrepreneurship and innovation.
More than 20 such firms - including Internet security firm Qihoo 360, dating website Jiayuan.com International and social networking site Momo - revealed plans in the first half to go private.
"The recent plunge in the mainland stock market will slow down their privatization plans," said Zhang Xiang.
The China Securities Regulatory Commission suspended new IPOs in July, and markets expect the launch of a new registration-based system for IPOs will be postponed until 2016, according to Shen.
"Tech firms that go private are likely to be listed on ChiNext and the strategic emerging industries board after the roll out of the registration-based IPO system," he said.
While analysts believe it will take time for Chinese investors to recover confidence in the domestic stock market, they expect U.S. stock markets to rebound shortly, partly because of the recovery in European markets on Tuesday.
"But for Chinese companies that are mulling an IPO in the U.S., they should lower their expectations of high valuations for their shares," Shen said.
