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Why Altaba Shares Fell 12% in December

By Anders Bylund – Updated Apr 16, 2019 at 9:49PM

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The "alternative Alibaba" took a big hit due to shaky consumer economics in China.

What happened

Shares of Altaba (AABA) fell 11.7% in December, according to data from S&P Global Market Intelligence. The investment firm, whose asset portfolio is roughly 26% cash equivalents and 74% shares of Chinese e-commerce giant Alibaba Group (BABA 2.93%), followed Alibaba's chart downward as trade tensions between Beijing and Washington intensified last month.

So what

The Chinese-American trade war continues to weigh heavily on financial results and investor expectations for Chinese companies, particularly those with broad exposure to consumer markets and online operations. Alibaba ticks both of those boxes and suffered a 13.8% drop in share prices last month. Altaba, which is literally an alternative way to invest in Alibaba, posted a slimmer price drop thanks to the stabilizing influence of large cash reserves.

Close-up shot on the corner of a traditional Chinese building with a modern skyscraper skyline in the background.

Image source: Getty Images.

Now what

Keep in mind that Altaba's cash cushion should slow down any drastic upward jumps that Alibaba might enjoy. This is a relatively new phenomenon for Altaba, which kept a jaw-dropping 91% of its assets in Alibaba shares as recently as last summer. The firm sold its first Alibaba shares in the third quarter to reach the cash position we see today, and management is looking for ways to return this cash to shareholders as efficiently as possible.

The best reason to prefer Altaba shares over buying Alibaba directly remains the hope that there might be a way around the tax-related overhang that is included in Altaba's share prices. Until then, expect the stock to keep moving along with Alibaba -- just at a slightly calmer pace.

Check out the latest Alibaba Group earnings call transcript.

Anders Bylund owns shares of Alibaba Group Holding Ltd. The Motley Fool recommends Altaba Inc. The Motley Fool has a disclosure policy.

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