Alibaba pays the price for China’s economic crisis

E-commerce giant Alibaba has succumbed to the crisis gripping the Chinese economy a year after the company became the world’s biggest float.

Founder and former English teacher Jack Ma became an overnight billionaire when Alibaba launched on the New York Stock Exchange in September 2014, as the firm raised a record-breaking $25 billion (£16.3 billion) in a float valuing the company at $186 billion.

Alibaba is the biggest player in the Chinese e-commerce market — where spending is set to hit $1 trillion by 2019 — accounting for 80% of online sales in China.

The firm is also among the top picks of UK retail investors, according to fund manager Hargreaves Lansdown.

But the company admitted today that a weakening Chinese economy has taken its toll on business, as it slashed forecasts for the total value of transactions it expects to take place in the current quarter.

This will now be “mid-single digits lower” than the giant’s initial estimates for the quarter.

Alibaba’s head of investor relations, Jane Penner, said consumers were still willing and able to spend but that the company had been seeing a “negative impact of the magnitude of the spending”. Average order values are also lower, Penner added.

The latest fears over the e-commerce giant come a month after it reported its slowest growth in transactions for more than three years.

Shares in the company are now below their $68 float price after a near-5% slump overnight to $60.91. The stock has halved since the end of May, when Alibaba’s shares hit $119 — valuing the company at a staggering $300 billion.

The latest bad news out of China comes hard on the heels of a dramatic slump in imports — fuelling fears of a hard landing for the world’s second biggest economy — and a month of turmoil in global stock markets following Beijing’s sudden devaluation of the yuan.

China also cut its official growth estimates for 2015 this week. China has also cut interest rates five times since November and intervened directly to stem plunging stock markets.