Alibaba has multiple issues, the cloud business is just one of them

But the failure of the cloud spinoff is not the only issue plaguing Alibaba.

Ever since founder Jack Ma compared the Chinese banking system to a "pawn shop", the conglomerate has just not managed to catch a break. Since that speech on October 24, 2020, Alibaba's US ADRs are down 75% in value.

A bigger fallout of Ma's speech was an industrywide crackdown in China, and the subsequent cancellation of Ant Financial's IPO, which was back then, touted to be the biggest IPO of the year. That further eroded investor confidence in the stock. Adding to that is rising competition from companies like Pinduoduo and Douyin, backed by ByteDance Ltd.

It's not as if its core business is hunky-dory either. Both Alibaba and traditional rival JD.com are coming off a disappointing Singles' Day campaign, with only single-digit percentage growth during their signature annual shopping festival.

Instead, the company will focus on issuing its first-ever annual dividend worth $2.5 billion in a bid to assuage shareholder concerns.

"The market is scratching its head,” said Willer Chen, research analyst at Forsyth Barr Asia told Bloomberg. "The first annual dividend looks like compensation to shareholders. However, it may not fully offset the shock given the higher value of cloud unit."

With the cloud business spin-off now in cold storage, investors are further concerned that some of Alibaba's other businesses may meet a similar fate. Its Hong Kong IPO of Freshippo has also been put on hold due to weak sentiments for consumer stocks, while its logistics arm Cainiao filed for a Hong Kong IPO as well, but the valuation it will command is still unclear.

Additionally, former CEO Daniel Zhang quit just months after agreeing to lead the cloud business.

In a separate regulatory filing, Alibaba said that the family trust of Jack Ma planned to pare further stake in the business but selling 10 million shares for $870.7 million.

Alibaba's US-listed shares have not only erased all their gains but also turned negative for 2023. The shares listed in Hong Kong have also opened 7% lower at the time of writing this article. Those shares are down 15% so far in 2023.