One of Alibaba’s (NYSE:BABA) leaders may be giving up on the company. Co-founder and executive vice chairman Joe Tsai revealed that he plans to sell 8% of his stake in the e-commerce giant. One of the driving forces behind the company’s early success, Tsai has been focusing on investments outside Alibaba recently. Bloomberg reports that he is executing the sale, worth roughly $260 million, through Morgan Stanley (NYSE:MS). This news hasn’t pushed BABA stock down. On the contrary, it’s been rising since the story broke on Dec. 16.
However, Tsai’s timing in offloading his stake in the company he helped build is worth a closer look, as it will likely have implications for investors.
What’s Happening With BABA Stock
BABA stock is starting this week off on a positive note. As of this writing, it is up 0.03% for the day, although its current trajectory indicates that it may slip back into the red. Given Tsai’s announcement, this wouldn’t be surprising. When a company’s leader starts offloading shares, it can easily spark negative momentum. He may have picked this time to sell since BABA is currently up 13% for the month.
Tsai isn’t the only important investor who has moved to sell off BABA stock lately, though. Hedge funds have been decreasing their positions in the company for months, as macroeconomic headwinds have pushed Chinese stocks down. Since last quarter, holdings have fallen by 12 million shares. As InvestorPlace contributor Thomas Niel reports, both main street and Wall Street investors have soured on the stock amid a turbulent market. Despite rising this month, BABA stock is coming off a highly volatile year during which it has lost 24% of its value.
Neither Tsai nor Morgan Stanley have commented on the sale yet. But it’s not hard to see why the billionaire would be moving to sell now. The year has been marked by economic headwinds spurred by China’s zero-Covid policies that have pushed prominent stocks down across many sectors. Alibaba’s losses for the year have been significantly lower than those of Chinese electric vehicle (EV) producers Nio (NYSE:NIO) and XPeng (NYSE:XPEV), even as demand for their products has boomed in 2022. But while the easing of some restrictions helped Chinese stocks rise early in the month, these policies could be reversed at any time as Covid-19 cases are still surging throughout the country. For that reason, it is still hard for many investors to bet big on Chinese companies.
The Bottom Line
It’s possible that Tsai may be reducing his BABA stock holdings because he has lost faith in the company. However, investors shouldn’t disregard the possibility that Tsai may need to free up funds to focus on other investments. Tsai owns both the Brooklyn Nets of the NBA and the New York Liberty of the WNBA. It would also make sense that he wants to focus on investments in the U.S. while China struggles to make up the economic ground it has lost.
Tsai offloading shares isn’t necessarily a reason to get against BABA stock. However, investors are still likely to proceed carefully as Chinese headwinds threaten markets. For that reason, Alibaba and its peers may remain volatile for the foreseeable future.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
