Why Alibaba Stock Dropped Today
What happened
Stock of Alibaba Group Holding (NYSE: BABA), the Chinese e-commerce giant, plunged in early trading Friday.
The stock is down 4.9% at 10:45 a.m. ET, in response to a Wall Street Journal report that the Office of the U.S. Trade Representative (USTR) has added Alibaba's AliExpress website to its list of "notorious markets" known for selling counterfeit goods.
So what
Actually, some 42 online marketplaces (and 35 physical ones) are now on this USTR list, which warns against sellers profiting from "counterfeit goods or copyright piracy" -- but on this list, Alibaba is arguably the biggest name. It's certainly better known than, say, such immediately fishy-sounding website names as "1Fichier," "Dytt8," and "Popcorn time."
Alibaba's also on the list twice, with its Taobao.com site having been added years ago. And as the Journal points out, Alibaba doesn't even seem particularly concerned by its presence on the list.
Merchants operating on AliExpress sometimes sell goods "blatantly advertised as counterfeit," even as other counterfeit goods are offered up as genuine, reports the Journal. And the Taobao website -- added in 2018 -- is still on the list today. Although USTR says Taobao has made some improvements in screening out counterfeit goods, U.S. companies whose copyrights are being violated on the site say there's been no decrease in the volume of counterfeit goods being sold -- the problem that got Taobao blacklisted in the first place.
Image source: Getty Images.
Now what
Now, what does this news mean for Alibaba in terms of dollars and cents?
Perhaps not much. As the Journal explains, USTR's list is compiled for the purpose of "naming and shaming" bad actors like Alibaba, but it does not result in any "official U.S. policy" to stamp out intellectual property theft or ban shopping on the sites. And the list doesn't seem to be slowing down Alibaba's business one bit.
Since 2018, Alibaba's sales have tripled, from less than $40 billion to more than $126 billion, according to data from S&P Global Market Intelligence.
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Rich Smith 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.
