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Alibaba Rallies as $2.8 Billion Antitrust Fine Less Than Feared

Alibaba rallies after the e-commerce giant says it doesn't any material impact from $2.8 billion antitrust fine.

Alibaba  (BABA) - Get Alibaba Group Holding Limited American Depositary Shares each representing eight Report was fined a record $2.8 billion by Chinese regulators in an antitrust crackdown, but the stock rallied after the e-commerce giant said it doesn't expect any material impact from the penalty.

American depositary receipts of Alibaba jumped 6.14% to $237.03 in premarket trading Monday after the fine was less severe than feared and a key uncertainty for the company was lifted.

The 18.2 billion yuan penalty was based on just 4% of Alibaba's 2019 domestic revenue, regulators said, according to Bloomberg. It was far less than the maximum 10% allowed under Chinese law. 

Is Alibaba a Buy Amid Chinese Regulatory Worries?

“We’re happy to get the matter behind us,” said Joseph Tsai, co-founder and vice chairman, on an investor call Monday. “These regulatory actions are undertaken to ensure fair competition.”

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The fine also came with “comprehensive rectifications” sought by regulators, one of which forces Alibaba to curtail the practice of forcing merchants to choose between it or a competing platform.

“Alibaba would not have achieved our growth without sound government regulation and service, and the critical oversight, tolerance and support from all of our constituencies have been crucial to our development,” the company said in an open letter. “For this, we are full of gratitude and respect.”

The Chinese government launched an antitrust investigation of the company last year after its founder Jack Ma publicly criticized the state-owned banking system and bank regulators.

Chinese leader Xi Jinping also personally intervened to stop the initial public offering of Ant Group, Alibaba's fintech affiliate.

Bloomberg reported Monday that Chinese regulators asked Ant Group to become a financial holding company that could be regulated more like a bank.

Analysts at Keybanc Monday maintained their overweight rating on Alibaba but cut the price target to $305 from $315.