Jack Ma Reappears –  But What Does The Market See?

The sudden news Wednesday January 20 that Jack Ma had “re-appeared” – in a 43-second video clip, after an unexplained public absence of almost three months – made headlines around the world. It was important enough to run just below stories about the U.S. presidential inauguration. 

Jack Ma — China’s world-class entrepreneur, visionary, showman, founder and controlling shareholder of internet giant Alibaba, and of The Ant Group, the world’s leading Fintech platform, the richest man in Asia, the most famous living Chinese person (well ahead of Xi Jinping, and trailing only Mao, Confucius and Bruce Lee in the all-time rankings) – had become over the past decade a symbol of China’s economic and technological rise, a combination of Steve Jobs, Jeff Bezos and Bill Gates rolled into one,

  • “It is hard to overstate the importance in China of Mr. Ma and his two companies. They have become synonymous to innovation. The media in China calls the country’s rising tech sector, ‘The era of Ma.’”

…and then, he had gone missing…

In the meantime the Chinese government had halted Ma’s $37 Bn public offering for The Ant Group – scheduled to have been the biggest IPO of all time – and had begun issuing new rules that significantly impacted Ant’s business model, along with public scoldings of Ant and by implication Mr. Ma. Regulators then announced proposals for a thorough restructuring of the company – a “rectification” – to break it up and “carve out the most lucrative units.” They floated the idea of sequestering Ant’s most important assets — its trove of customer data — and handing it over to a state-owned company. 

Next they turned to Ma’s roughly $800 Bn flagship, Alibaba.

  • “The state market supervision administration filed an investigation into Alibaba Group Holdings Ltd over ‘suspected monopolistic practices.’”

While all this corporate surgery was being publicly discussed, Jack Ma had not been seen in public since October. His name and photograph were removed from publicity websites and promotional material for long-scheduled events he had orchestrated in the past. 

  • “When it became apparent that Ma had failed to turn up for a recent taping of a TV program he created and was known to be passionate about, analysts, investors, and the financial press began to wonder: Where is Jack?”

Ominous speculation arose. Fortune wrote that “The rumors alone represent a chilling new message from Beijing.”

  • “His disappearance is reminiscent of past instances in which Beijing has detained business executives without warning for what it sees as impropriety.”

Thus, Ma’s re-emergence was real news, of global importance.  

The Market Reaction

Those 43-seconds were enough to send Alibaba’s shares soaring – roughly a $45 Bn gain in market value in one day. The video at least established that Mr. Ma was still alive. One might say that Jack Ma is worth that much to the shareholders. Or at least such was the value of comfort just to know that investors’ worst fears might not be true.  

But the following day, January 21, the share price sagged, as the market began to reassess his “reappearance” more closely. Alibaba gave back half the previous day’s gains. It was a strong up-day for the American tech companies that Alibaba runs with on the New York market.  

Alibaba also underperformed its Chinese peers. Its decline represented significant (negative) alpha in the context of both the U.S. and the Chinese markets.  

What is the Message?

It is a picture of Relief, followed by Reality. But what was “Reality”? 

I think investors began to appreciate that the new video is really quite strange. 

Consider the surface facts. 

  • The video was published by Chinese state media. We have to assume it serves their purposes. 
  • Alibaba personnel had no official comment. Why not? They must have had some information. Or perhaps not? 
  • The Jack Ma Foundation — purportedly the host of the event – was also vague: e.g.,
  • “A spokesperson for the Jack Ma Foundation confirmed to Fortune that Ma participated in the event on Wednesday; the spokesperson would not comment on where Ma is currently located.”
  • It is impossibly brief – and carries no clear identifying information as to a certain date, or a specific place. 
  • It is – one must assume – purposefully inconsequential, and irrelevant to the true concerns of Ma’s global public. In the video Ma says nothing about anything of importance, nothing about the events of the last few months, or about his forthcoming plans. Nothing about the aborted IPO. Nothing about either Alibaba or Ant. His remarks are addressed to an unseen group of rural village school teachers. Here’s a sample (as translated by Google): 
  • “I have been studying and thinking [says Jack], and have become more determined to devote myself to education and public welfare. This is not only because I am a teacher myself, but more importantly, education, especially rural education, is of great importance…. Rural life will become better and better in the future.”

Is Ma speaking in code here? Does “education” mean re-education? Does a “rural life…in the future” mean a life put out to pasture? 

Banishment to the countryside was a common practice in the Cultural Revolution, a point that would not be lost on the Chinese audience. 

The delivery is also strange. His presentation is largely devoid of affect. Comparing the Wednesday video with other videos of Jack Ma from happier times is illuminating. 

Jack Ma in his normal mode is a consummate showman, described as “attention-loving,” “flamboyant,” “flashy and outspoken,” “brash and charismatic.” His performances are typically dramatic and engaging. His facial expressions are animated. He gesticulates expansively, even in seated interviews. He revels in his fluency in English and his grasp of modern idioms. He always seems to be having great fun being Jack Ma.

In today’s video, it is a different man we see. Ma looks ill-at-ease. He swallows hard a few times. He does not gesture. His hands rest in his lap and do not move. He does not smile. Perhaps unsurprisingly he speaks only in Chinese – although he certainly knew that even the briefest salutation or good wishes expressed in English would have carried a great reassurance to his global audience. 

This seems more like a hostage video than a signal of his rehabilitation. A man who is above all a master communicator has been reduced to 43 seconds of insubstantiality. 

Jack Ma once said, “I think among the richest men in China, few have good endings.” This may be the message that the Chinese government wants to underscore by permitting this peculiar video to be made public. This is China under Xi Jinping. If we can reduce Jack Ma to this, consider what we can do to you. I think this is what explains the market’s on-second-thought adjustment downward in the days following Ma’s “reappearance.”

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