As of the close of U.S. stocks on Friday, December 16, Beijing time, Xpeng Motors' share price fell 7.54%, mainly affected by Alibaba Group's plan to reduce its holdings of Xpeng shares. Earlier on Friday, Alibaba suddenly announced plans to reduce its stake in Xpeng. What was the plan behind it and what impact would it have on Xpeng?
Regulatory filings with the U.S. Securities and Exchange Commission (SEC) show that Alibaba subsidiary Taobao China Holdings Co., Ltd. intends to sell 25 million shares of Xpeng American Depositary Shares (ADRs). Based on Xpeng's closing price on Thursday, these shares are worth approximately US$391 million (approximately 2.768 billion yuan). As soon as the news came out, Xpeng's stock price fell as much as 8.6% on Friday.
The reason why Xpeng's share price has fluctuated so much is because of the company's close relationship with Alibaba. According to SEC filings on December 6, Taobao China holds approximately 10.2% of Xpeng’s outstanding shares. Xpeng's latest annual report shows that as of the end of March this year, Taobao China was Xpeng's second-largest shareholder, second only to the company's founder He Xiaopeng. But an SEC filing on Friday showed that Taobao China is selling shares of Xpeng it bought in September 2019 as a result of its investment in Xpeng ahead of its IPO.
The two companies also collaborate in other areas. Xpeng's self-driving capabilities are supported by a computing center it established with Alibaba Cloud. Xpeng is also working with Alipay to develop in-car payment capabilities.
Why did Ali reduce its holdings?
Xiadong Bao, a fund manager at Edmond de Rothschild Asset Management, said Alibaba’s plan to reduce its stake in Xpeng shows that the Internet giant is shifting its focus to its core business. "Unlocking shareholder value and refocusing on its basic business areas is indeed Alibaba's top priority." Bao Xiadong said.
The performance of Alibaba's stock price this year has been lackluster. As of the close of U.S. stocks on Friday, Alibaba's stock price rose 2.76%, and once rose as high as 4.2% during the session. Earlier this month, Alibaba was surpassed in market value by rival Pinduoduo, prompting Alibaba founder Jack Ma to urge changes at the company in an internal memo.
The relevant person in charge of Alibaba responded that the company sold part of its shares in Xpeng based on its own capital management goals, and its shareholding was reduced from 10.2% to 7.5%. The company believes in Xpeng's prospects and looks forward to continued cooperation with the company.
Impact on Xiaopeng
What impact will Ali's current holding reduction have on Xiaopeng? Bao Xiadong believes that given that Alibaba has always been a major cloud service provider, for Xiaopeng, "the company's autonomous driving system training may now have problems." However, he added that Xpeng could still rely on other backers including Volkswagen.
Last month, Xpeng reported a larger-than-expected third-quarter loss. Even with record fourth-quarter deliveries, the company has shipped fewer than 150,000 vehicles this year, a pittance compared with rivals such as BYD.
At the same time, Xpeng has also attracted the attention of other investors. In July this year, Volkswagen announced that it would invest US$700 million in Xpeng to jointly develop electric vehicles in China. Volkswagen will eventually hold 4.99% of Xpeng's shares through the capital increase and will receive an observer seat on the board of directors.