BABA Stock May Not Recover Soon
Alibaba Group Holding Ltd (NYSE:BABA) has been making new sales records in the holiday period and was confidently going ahead. But all of a sudden, a new development put the brakes on everything that was going right for the company. Alibaba stock lost over three percent in the last trading session.
As per media reports, the company has been put back on a U.S. agency’s list of global marketplaces known for counterfeit and pirated goods. The U.S. Trade Representative’s (USTR) annual list, released Wednesday, highlights physical and online markets “notorious” for fakes. It specifically mentions Alibaba’s flea-market-like “Taobao” shopping platform, which hadn’t made the list in years, citing rights holders’ complaints regarding obstacles to removing counterfeit items from the site. (Source: “Alibaba Lands on U.S. Government’s ‘Notorious Markets’ List for Fakes,” The Wall Street Journal, December 21, 2016.)
This is what the agency had to say, “The Taobao.com e-commerce platform is an important concern due to the large volume of allegedly counterfeit and pirated goods available and the challenges right holders experience in removing and preventing illicit sales and offers of such goods.”
The company has been facing this counterfeit-goods problem for a long time and this has damaged its brand as well as BABA stock.
In its official statement, Alibaba said that the company is very disappointed by the USTR’s decision to include Taobao on its “notorious markets” list, which ignores the real work Alibaba has done against counterfeiters. In 2016 alone, the company proactively removed more than double the number of infringing product listings than in 2015. (Source: “Statement from Alibaba Group on United States Trade Representative (USTR) Special 301 Report,” Alibaba Group Holding Ltd, December 21, 2016.)
What is of concern is that Alibaba questioned whether the USTR decision was based on actual facts or influenced by the current political climate. This is in reference to President-elect Donald Trump, who has been a vocal critic of China. Alibaba stock has been going down since he won the presidential race last month.
Just few days back, the company had described how its Operation “Cloud Sword” led to the arrest of more than 300 suspected counterfeit gang members in 164 investigations. Although, Alibaba has been working towards removing counterfeiters, the efforts do not seem to be enough. It will take some time before the company can effectively deal with this issue and till then, BABA stock is likely to remain under pressure.