Alibaba Group warned of slower earnings growth on Thursday and launched a $3 billion bid to establish a financial arm to boost its U.S. ambitions.
“Economic conditions in some markets are likely to impact the pace of growth of our core e-commerce business. In addition, there has been a gradual decline in average transaction value in our payment segment,” Chairman Jack Ma said on a conference call after the company’s earnings results.
Alibaba beat analysts’ estimates for its March quarter earnings but its outlook was lower than forecast. It also said it would launch a $3 billion offer to acquire a 15 percent stake in Tianjin Tianhai Investment Ltd, a trading platform operator.
“This will help Alibaba strengthen its financial services presence in the U.S. while strengthening its infrastructure,” Hong Kong-based ThinkEquity analyst Jeffrey Fan wrote in a note.
The No. 2 Chinese e-commerce company also said on the conference call it would offer a “floor price” for up to 12.5 percent of its A-share listing in Hong Kong at HK$20 each.
The listed unit does not require shareholder approval for the transaction but the A-share offer involves a rollover from a Singaporean subsidiary that does need shareholder approval, Alibaba said.
Shares of Alibaba were trading down 4.7 percent at HK$191.65 before the market opened.
Investors questioned the company’s forecast of its annual payment service payment volumes rising between 40 percent and 45 percent to $147 billion to $166 billion for the year.
Strong revenue growth will be needed for Alibaba to keep its valuation high as recent struggles in offline retail have cost its shares of more than 20 percent since the start of the year.
Alibaba’s Chinese online retailer Taobao had been hurt by a government crackdown on “anonymous shopping” while its massive cloud business remains unprofitable, to the extent that it spent $1.17 billion last year to raise its investment in China Cloud.
“The average transaction value is declining, so online stores are seen as less profitable because they have more other expenses,” Qi Rong, analyst at China Merchants Securities, said.
The stock hit a record high last week but has since tumbled 20 percent to $166.32 on concerns about Taobao’s business, especially retail sales.
It would take a significant recovery in consumer confidence in China to make those big investors question their investments in the company, another analyst said.
“If you look at the big investors’ daily portfolio movement, those stocks don’t move very much,” IHS Markit analyst Colin Sukwa said.
Major investors in Alibaba include Singapore state investor Temasek Holdings, Japan’s SoftBank, Yahoo, Citigroup and Chinese fund Tsinghua Holdings. (Additional reporting by Sijia Jiang and Aaron Sheldrick; Editing by Chris Gallagher and Will Waterman)