Shares of Alibaba Group Holding Limited (NYSE:BABA) are bouncing back today from a historical sell-off that’s seen the Chinese e-commerce titan’s stock lose 30% of its value in just two months. As of 10:55 a.m. EST, Alibaba shares are up 6% off of yesterday’s multi-month low.
Suffice it to say that this is a curious development on a day when The Wall Street Journal just reported “regulatory risks” were extending a “Christmas Eve selloff” at Alibaba, and described how the canceling of a planned IPO of Alibaba’s Ant Group subsidiary and an antimonopoly investigation in China have combined to cost Alibaba $273 billion worth of market cap in just a couple of months. Citing analysts, the Journal warned that pressure is “intensifying” on both Alibaba and on Ant, and that regulators have instructed the latter “to refocus its attention on its original payments business” and stop expanding into new — and more profitable — business areas such as loan origination.
That being said, even the Journal admits that investors may be overreacting to regulatory fears, and that “it isn’t in China’s interest to break up, or destroy such a profitable enterprise.”
And that may be the sentiment that is lifting Alibaba shares today.
As TheFly.com reports today, Truist Financial (the former BB&T) just came out with a note analyzing what Alibaba might be worth based on a “sum of the parts” valuation, in case the company is broken up. The analyst concluded that such a break-up is “unlikely,” and that even if it were to happen, a broken-up Alibaba would still leave its shareholders in possession of parts worth at least $294 in total — and therefore 25% more than what Alibaba stock is currently selling for.
The analyst furthermore noted that Alibaba is so important to the Chinese economy by now that it has become a “must” for shoppers, and thus will remain very profitable whether broken up or not. It’s based on this reassurance, it seems, that Alibaba investors have returned to buy the stock today.