Why Alibaba Stock Crashed on Thursday
What happened
Shares of Alibaba (NYSE: BABA) slumped on Thursday, falling as much as 7.8%. As of 1:43 p.m. ET, the stock was still down 6%.
The catalyst that sent the tech titan lower was news of a fresh government investigation into a recent data breach.
So what
Executives from Alibaba, specifically the company's cloud computing operation, have been summoned to Shanghai to provide details regarding a recent data breach affecting as many as 1 billion Chinese citizens, according to a report in The Wall Street Journal. The vast cache of data was stolen from a police database in June and was put up for sale by the unknown hacker (or group) for roughly $200,000. This marks one of the largest data breaches in China's history.
The breach gave hackers access to sensitive personal data, including names, birthdates, and national ID numbers (China's equivalent to a Social Security number). Researchers looking into the theft revealed that the information was stored on Alibaba's cloud platform, putting the company in the crosshairs of a government investigation.
The dashboard that provided access to the data was left unprotected, not requiring a password for more than a year, while also accessible from the internet. Even worse for Alibaba was a revelation that the technology used to store the information was several years out of date and "lacked basic security features," according to the report.
Now what
This isn't a good look for Alibaba, particularly not in light of recent crackdowns on technology companies by Chinese regulators. The company has also been plagued by China's "Zero-COVID" policy, which has resulted in numerous lockdowns, pressuring the company's growth.
This latest misstep won't do Alibaba's investors any favors. The past year has already been a tough one, sending the stock down more than 50%. Given the ongoing challenges and the headwinds that remain, investors might want to give Alibaba stock a pass.
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Danny Vena has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
