Alibaba trims stake in Xpeng for second time in December

  • China based e-commerce giant Alibaba cut its stake in XPeng, a Chinese electric vehicle (EV) manufacturer, to 7.5% from 10.2% for about $391 million, leading to a huge loss to the EV focused carmaker.
  • Alibaba has adopted monetizing to restructure and create value as it is facing unexpected hardship and competition these years after the COVID-19.
  • While going through the short-term challenges, XPeng is now favoured by the mature Germany car producer Volkswagen for cooperation, with Alibaba still its second largest stakeholder.

In the pursuit of capital management goals, online shopping titan Alibaba has trimmed its share in XPeng by 2.7% to optimize its investment portfolio, a second decision this December, dealing a heavy blow to XPeng’s share price.

With Alibaba remaining it’s long-term investor, this EV maker is expected to overcome the challenges with the financial and technology support of new investors such as the incumbent Volkswagen.

Alibaba Group

XPeng hit hard by Alibaba’s second share cut

Alibaba Group, often called the Amazon of China, has reduced its share in XPeng from 10.2% to 7.5% this December, according to a US regulatory filing on 15 December. Alibaba’s stake in this controversial carmaker plummeted from around 19% at its IPO all the way to this figure.

XPeng shares plunged by as much as 8.6% after the sale with the stake sold valued at approximately $391 million.

Why Alibaba made this move

This Chinese e-commerce leader has restructured into six separate units to achieve transformation while struggling with a variety of factors such as China’s intense competition featuring emerging rivals, and ever-changing consumer demand stimulated by the pandemic. A series of changes in the giant’s investment portfolio have been witnessed to maximise the value, for example, canceling the spin-off cloud computing business.

Alibaba’s plan to trim the XPeng stake unveils that the internet leader is turning its focus onto its core businesses, according to Xiadong Bao, a fund manager at Edmond de Rothschild Asset Management, “Unlocking the shareholder value and refocus on its essential business lines are really the priority for Alibaba.”

Also read:Alibaba’s surprise reversal slashes $20 billion from market value

“Consistent with our capital management objectives, we sold a portion of our holdings in XPeng Inc., taking our stake from 10.2% to 7.5%,” said an Alibaba spoksperson. “We have a strategic relationship with XPeng, which is one of China’s leaders in electric vehicles. We believe in XPeng’s prospects and look forward to continued cooperation with the company.”

Cashing out currently is prioritised by Alibaba to recover and restructure. Therefore, stake reduction can be viewed as a temporary solution.

Where is the way out for XPeng

Even so, Alibaba still remains the second-largest shareholder in XPeng after its founder He Xiaopeng at the moment, according to the EV maker’s latest annual report.

Despite suffering from an unexpected third-quarter operating loss, this Guangzhou-based EV maker has gained support from German carmaker Volkswagen, which purchased a 5% stake in XPeng this summer. Partnering with this autonomous vehicles focused young company, Volkswagen is also expected to share inspiration, design, and engineering capability to face the increased competition in the global EV market.

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