What happened
Shares of Alibaba (BABA 1.17%) were moving higher today after the Chinese government concluded its investigation into Ant Group, its fintech arm, with a $984 million fine. Alibaba also announced some new artificial intelligence (AI) products this morning, though the Ant Group resolution seemed to be the major reason for the stock's gains.
As of 12:02 p.m. ET, the stock was up 7.9%.
So what
Chinese officials this morning announced a $984 million fine, ending an investigation that began in late 2020 when the government blocked its initial public offering (IPO), kicking off a widespread crackdown on Chinese tech companies and a massive sell-off in the Chinese tech sector.
According to the People's Bank of China, as reported by Reuters, Ant violated laws regarding corporate governance and consumer protection and conducted banking and insurance activities without the appropriate license. It also ordered Ant Group to cease operations of its crowdfunded medical aid service Xianghubao, which it closed in 2021.
Investors cheered the news as it signals the end of the investigation and removes a cloud that has long been hanging over Alibaba's head. With the fine out of the way, Ant now plans to seek a financial holding company license and, eventually, an IPO. Separately, the company also unveiled a new AI image generator called Tongyi Wanxiang, adding to its lineup of AI products.
Now what
Alibaba was a fast-growing company until a few years ago, as a crackdown by the Chinese government and COVID lockdowns torched its growth. The company has responded by announcing a breakup plan, splitting the company into six separate divisions to help unlock its value.
According to traditional metrics, the stock looks cheap if it can return to growth. With the Chinese tech crackdown receding and the Covid Zero policy now over, those chances have increased, but the business has yet to respond, and the stock is still down significantly from its former heights.
