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Alibaba (BABA) founder Jack Ma has buoyed shares of the Chinese online retail leader after formally ending his control of Ant Group. Bringing another part of Alibaba's upheaval to a close, Jack Ma reduced his voting power in two holding companies that control a majority of Ant Financial. This former Alibaba subsidiary owns Alipay. Alibaba stock shot up more than 8% in Hong Kong on the news and has risen 4.6% in the US premarket on Monday to $112.35.
Jack Ma and company spun Alipay and other fintech departments out into a separate company now called Ant Group back in the middle of the last decade. When Jack Ma decided to criticize Chinese financial regulators in the leadup to Ant Group's giant IPO in late 2020, however, Chinese authorities clapped back. Soon enough Ant Group's IPO was being canceled, and Alibaba, which owns about one-third of the Chinese version of Block (SQ) or PayPal (PYPL), steadily saw its relationship with the Chinese state grow precarious. This led BABA stock to collapse by more than 75% and drag much of the rest of the Chinese tech sector with it throughout 2021 and 2022.
Investors are now optimistic that all that negativity is behind China's Amazon (AMZN) after Jack Ma agreed to allow himself and his partners to vote individually as part of the two investor groups, meaning that Ma now officially has much less than majority control over Ant Financial. In fact, Ma will now only control about 6% of voting power after giving up his voting rights to one of the two holding companies. This means that Alibaba's 33% stake in Ant is now much more significant than before the announcement as well.
"In order to continue to optimize our corporate governance and achieve long-term sustainable development, Ant Group [...] has been undertaking several initiatives since 2021. We have increased the number of independent directors to four, which constitutes half of the incumbent members of our board of directors," announced Ant Group in a statement. "Our board has also formed six sub-committees, among which are the Risk Management and Consumer Rights Protection Committee and the ESG Sustainable Development Committee. In addition, we plan to add a fifth independent director, after which independent directors will comprise a majority of our board."
The statement continued: "No shareholder will have the power to nominate the majority of Ant Group's board of directors. Therefore, no shareholder, alone or jointly with other parties, will have control over Ant Group."
New corporate ownershipo structure of Ant Group / Source: Ant Group
As the major indices in the United States are trading ahead slightly in Monday's futures market, with the tech-focused NASDAQ up 0.3% to lead the pack, expect Alibaba stock's premarket rally to translate to the regular session. BABA stock was already up 16.8% year to date before Monday's news and will likely exceed 20% once the regular session gets going. After muddling through two horrible years for Alibaba stock, investors should take this as a positive sign that the worst must be behind them.
Alibaba stock has blown through the $103 to $105.25 supply zone that has held BABA in place since July 2022. The resistance zone pushed prices lower in three weeks between late July and late August of last summer. With the stock moving well above $112 in the premarket, this region will likely become support in the subsequent weeks.
The weekly chart below shows that the next price level for profit-taking is not until $125. That price level worked as resistance in January, February and July of 2022. The Accumulation / Distribution line on the weekly chart shows that accumulation has been taking place since late October. This can be taken as a sign that the upward momentum in BABA stock may not be shortlived.
Well below the current price for BABA, both the 8-week and 30-week moving average appears to be converging near $89, which will likely now serve as long-term support.
BABA weekly chart
