Long term Alibaba shareholders have suffered. Those who had bought it 3 years ago have seen the value shrank by 70%, while those who have held since its IPO are up 10% after holding for 9 years (a paltry 1% return). It was not fundamentals that destroyed because Alibaba’s earnings have went up many folds since its IPO
So what went wrong with Alibaba? Knowing this could be the root to solving the problem.
Problem: Negative Investor Perception
Before 2020, investors were keenly aware of how much Alibaba grew its earnings and abscribed a fair value to it in the region of US$200 for about 30-40 times P/E. That was fair considering Alibaba was growing its profits at a CAGR in its teens annually.
We knew what happened next – President Xi imposed tough regulations and clip Alibaba Wings. End state today, Alibaba is now only valued at 10 times
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