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Why Alibaba’s Stock Jumped After $2.8 Billion Antitrust Fine

Alibaba’s Hong Kong-listed shares jumped 6.5% to close at 232.20 Hong Kong dollars Monday, its first day of trading following remarks from its top management about the anti-trust penalty.

China’s State Administration for Market Regulation on Saturday handed down a 18.23 billion renminbi, or $2.78 billion, fine on the tech platform, one of the largest fines ever levied by Chinese authorities. The amount equaled to around 4% of the group’s 2019 revenue, although according to the firm, the fine for the violations could have been up to 10% of its annual revenue.

“We have experienced this scrutiny, and we’re happy to get the matter behind us,” said Joe Tsai, executive vice chair of Alibaba, affirming that the the group had accepted the fine and would not appeal it. “But I think on a going forward basis globally the trend is that regulators will be more keen to look at some of the areas where you could have unfair competition … We’ve gotten to know [regulators’] thinking very well. It’s a very healthy process.”

The company said it would pay out of its current liquidity, which as of Dec. 31 last year was approximately $70 billion. Management also underscored it did not expect it to materially impact its business as China’s largest e-commerce operator and that it would introduce new measures to help keep businesses on the platform.

“We’re going to both reduce fees and charges to help merchants and brands at the same time, also invest and spend more for them,” said chief financial officer Maggie Zhang. “So that impact is going to be both reflected in both top line and bottom line. Overall, we have reserved billions of [renminbi] in additional annual spending to support the initiatives in the future year.”

Alibaba’s platforms serve 780 million annual active customers who spend on average 9,000 renminbi each a year.

“We don’t rely on exclusivity to retain our merchants,” said Daniel Zhang, chief executive officer of Alibaba Group. “And if you look at the exclusivity arrangement before, I would say this only cover a couple of Tmall flagship stores.”

This story was reported by WWD and originally appeared on WWD.com.

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