Alibaba has increased its share buyback program to $25 billion, the largest amount ever committed by a company for a repurchase plan. The announcement made Tuesday came as the company continues to face challenges in shoring up investor confidence amid increased regulatory scrutiny and concerns about its decreasing profits.
The announcement of the record share buyback commitment is the second time Alibaba has increased its repurchase program within a year. Alibaba announced in August that it would raise its share buyback program from $10 billion to $15 billion.
Alibaba said that as of March 18, it had repurchased nearly $9.2 billion of its U.S.-listed shares as part of a previously announced program that was set to extend through the end of the year. The current $25 billion buyback program will last for two years, from March 2024 to March 2025.
Alibaba's share price has plummeted by more than 50% since last year. Prices did increase over the past few days following a tech stock rally prompted by an announcement made by Chinese Vice Premier Liu He regarding new measures aimed at boosting China's economy. Liu also announced the implementation of favorable policies to bolster the nation's capital markets.
Alibaba's Deputy Chief Financial Officer Toby Xu said the increased buyback program shows the company's confidence in its long-term sustainability and growth. He added that the company's recent stock performance does not fairly reflect its financial health and expansion.
Following the announcement, Alibaba's stock climbed 4.8% in Hong Kong, while its stock in the U.S. fell 4.3%. Alibaba's repurchase move makes sense, according to Rukim Kuang, founder of Beijing-based Lens Company Research, because Beijing's anti-monopolistic and "disorderly growth of capital" actions will limit Alibaba's prospects for fresh investments in the short term.
Kuang said Alibaba does not have to keep large amounts of cash on their books as they attempt to refocus their business and expand into other segments. According to recent filings, Alibaba had about $75 billion in cash, short-term investments, and cash equivalent as of December.
Since late 2020, when its billionaire founder, Jack Ma, publicly criticized China's regulatory structure, the business has been under continued pressure from investors and the government. Following that, authorities stopped Alibaba's planned blockbuster IPO of its banking unit Ant Group and slammed the company with a record $2.8 billion fine for anti-competitive behavior, causing its stock to plummet.
Its success has also been harmed by increasing competition from rivals, slowed consumption, and a rapidly evolving e-commerce sector. Alibaba's most recent earnings report showed sales growth of 10% year over year, its poorest quarter since going public in 2014. It was also the first time its growth had dipped below 20%.
