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Alibaba Sales Growth Slowdown Spooks Yahoo Shareholders

Alibaba Group Holding Founder Billionaire Jack Ma
Alibaba Group Holding, founded by billionaire Jack Ma, disclosed the financials in a filing today that included names of its 27 partners, key tenants to the company’s unique corporate governance structure. Photographer: Daniel J. Groshong/Bloomberg

June 17 (Bloomberg) -- Alibaba Group Holding Ltd.’s fourth-quarter revenue growth slowed and profit margins declined as the e-commerce company spent more on marketing to attract smartphone users.

Alibaba’s first revision to its initial public offering prospectus showed sales in the quarter through March increased 39 percent as merchants allocated less of their marketing budgets to Alibaba’s platforms during the period. That compares with a growth rate of 71 percent for the same quarter a year earlier. Operating margins narrowed to 45 percent from 51 percent in the prior year.

The company’s filing yesterday also named the 27 members of a partnership that is key to Alibaba’s unique corporate governance structure. Shares of Yahoo! Inc., which owns a 23 percent stake in Alibaba, fell in New York yesterday as investors were spooked by the slower growth that the Chinese e-commerce company disclosed, according to Sameet Sinha, an analyst at B. Riley & Co.

“Alibaba’s numbers look as if revenue growth is slowing down and margins are lower than expected,” said San Francisco-based Sinha, who has a buy rating on Yahoo. “Their mobile as a percentage of total transaction value has increased dramatically, and people tend to spend less on mobile.”

SoftBank, Yahoo

SoftBank Corp., which owns more than 30 percent of Alibaba, fell 2.5 percent to 7,483 yen in Tokyo trading, its lowest level in a month and extending its loss this year to 19 percent. Yahoo fell 5.8 percent to $34.81 in New York trading yesterday.

Investors have been awaiting additional details as they weigh whether or not to buy shares in Alibaba’s IPO -- which could be the largest ever in the U.S. The three months through March generally contribute the smallest portion of Alibaba’s annual revenue, in part due to the beginning of the Chinese New Year, according to the filing.

Alibaba’s efforts to attract mobile users to its websites are a key plank of the company’s growth strategy. The company said in the filing it expects mobile transactions as a percentage of the total to continue increasing, as more shoppers use smartphones to purchase items online.

Mobile revenue as a percentage of total sales increased to 12 percent in the three months through March from 2.2 percent in the same quarter last year, the filing shows.

Taobao, Tmall

Transactions on mobile accounted for 27.4 percent of Alibaba’s total retail trades in the three months ended March, compared with 10.7 percent in the same period last year.

Active buyers on Alibaba reached 255 million in the 12 months ended March, from 172 million a year earlier.

For the year through March, Alibaba’s net income rose to about 23.1 billion yuan ($3.7 billion), compared with 8.4 billion yuan a year earlier. Revenue rose 52 percent to 52.5 billion yuan during the year, with much of that gain coming in the quarter that ended in December, which included a promotion day that drove sales at Alibaba’s retail marketplaces.

The company’s retail marketplaces -- Taobao Marketplace, Tmall and Juhuasuan -- accounted for 82 percent of revenue, the filing shows. Virtual shopping center’s gross merchandise volume doubled during the financial year to $81 billion while volume at Taobao Marketplace, which enables individuals and small businesses to sell products, rose 42 percent to $189 billion.

Singles Day

The company’s sales on “Singles Day,” a sales-promotion day on Nov. 11 last year, helped boost transactions on Taobao Marketplace and Tmall to 35 billion yuan in a 24-hour period.

Alibaba has a value of $168 billion, according to analysts’ average estimate. While the valuation may change with the updated financials, it indicates a price of 45 times the latest year’s earnings, data compiled by Bloomberg show.

The 10 Chinese Internet and technology companies listed in the U.S. for which data is available, including Baidu Inc. and Sina Corp., trade at a median of 39 times historic earnings, data compiled by Bloomberg show.

The new filing didn’t answer all of investors’ questions, however. Alibaba’s choice of a listing venue -- the New York Stock Exchange or Nasdaq Stock Market -- hasn’t been identified.

Alibaba’s partners will be able to nominate a majority of Alibaba’s board. Nine out of the 27 partners are female, the filing shows.

Loan Balance

The partnership committee -- responsible for administering partner elections and allocating the bonus pool -- consists of five people: founder Jack Ma, Executive Vice Chairman Joseph Tsai, Chief Executive Officer Jonathan Lu, chief people officer Lucy Peng and vice president of strategy Ming Zeng.

Among those in the 27-member partnership are six executives who hold positions in Alibaba’s financial services affiliate, Small and Micro Financial Services Company. Ma owns 46 percent of the financial arm, the parent of Alibaba’s Alipay payment affiliate, according to the filing. The company is in talks to regain a stake in Alipay, a person familiar with the matter said last month.

The financial arm’s small-loans business had more than 365,000 borrowers with an outstanding loan balance of 13.2 billion yuan as of March.

The company named Yahoo co-founder Jerry Yang and Tung Chee-hwa, the former chief executive of Hong Kong, as independent directors. Michael Evans, who served as vice chairman of Goldman Sachs Group Inc., leading the firm’s operations in emerging markets until he left the firm last year, also was named a director on Alibaba’s board.

Alibaba didn’t add any underwriters in addition to Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs, JPMorgan Chase & Co., Morgan Stanley and Citigroup Inc.

To contact the reporters on this story: Leslie Picker in New York at; Jonathan Browning in Hong Kong at; Lulu Yilun Chen in Hong Kong at

To contact the editors responsible for this story: Michael Tighe at; Mohammed Hadi at Elizabeth Wollman

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