Why Alibaba Stock Was Soaring Today
What happened
Shares of Alibaba (NYSE: BABA) were moving higher Tuesday after the Chinese tech giant announced an increase in its share buyback program, signaling that management sees the stock as undervalued.
As of 12:22 p.m. ET, the stock was up 10.7%.
Image source: Alibaba.
So what
On Tuesday morning, management revealed that the board had voted to boost the size of its share repurchase authorization from $15 billion to $25 billion, equivalent to about 8% of the stock's market cap after the morning's gains. The company did not explain the move, but called it a sign of confidence about its continued growth.
Alibaba shares surged last week after China's Vice Premier Liu He said that the government would act to support stability in the economy and financial markets, and that its ongoing crackdown on tech companies should be over soon. That announcement followed more than a year of tightening regulations on that country's tech companies. Alibaba was particularly targeted. The government in Beijing blocked the planned spinoff and IPO of Ant Group, its financial arm; levied a $2.8 billion anti-monopoly fine against it; and forced it to divest itself of several of its media assets. Those actions and similar ones involving other companies have rattled investor confidence in China. Alibaba stock fell by as much as 75%, and its peers experienced sharp declines as well.
Now what
Following last week's announcement, Chinese officials have continued to send conciliatory signals to the market. Beijing now seems to believe its prior policies have gone too far, given that China's GDP growth slowed to just 4% in the fourth quarter, and Chinese stocks have lost more than $2 trillion in market cap.
Alibaba's share buyback announcement won't make a huge difference, but it's the latest sign that the tech giant is on the rebound after a forgettable year for investors.
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Jeremy Bowman owns Alibaba Group Holding Ltd. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
