Alibaba slides after its chairman announces he'll step down in a year (BABA)

Jack Ma

Alibaba shares dropped after the company announced that Jack Ma, its co-founder and executive chairman, will step down in a year.
CEO Daniel Zhang will succeed Ma, who will remain a permanent member of the Alibaba Partnership after retirement.
Jefferies analysts said the 12-month timeframe would enable a smooth transition with lower "key-man risk" following Ma's reduced role in Alibaba.
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Shares of Alibaba dropped 1.7% Monday ahead of the opening bell after the Chinese e-commerce giant announced that Jack Ma, its co-founder and executive chairman, will step down on September 10, 2019.

CEO Daniel Zhang will succeed him as chairman.

"Mr. Ma will continue as executive chairman of the company over the next 12 months to ensure a smooth transition of the chairmanship to Mr. Zhang," Alibaba said in a press release. The company added that Ma will complete his term on the board of directors until the annual general meeting in 2020. Also, he will remain a permanent member of the Alibaba Partnership, which consists of 36 members who serve in leadership roles across the company’s different business units.

In the release, Alibaba attached a letter from Ma addressed to customers and shareholders.

"This transition demonstrates that Alibaba has stepped up to the next level of corporate governance from a company that relies on individuals, to one built on systems of organizational excellence and a culture of talent development," Ma said.

"The one thing I can promise everyone is this: Alibaba was never about Jack Ma, but Jack Ma will forever belong to Alibaba."

Karen Chan, an analyst at Jefferies, said the transition was arranged in a way that would reduce the risk of Alibaba failing without Ma.

"We believe the 12-month time frame would enable a smooth transition with lower 'key-man risk' following the reduced role of Jack Ma in Alibaba’s VIE enhancement as discussed in its latest 2020 fiscal year," said Chan in a note sent out to clients on Monday.

"We believe by retaining a permanent role in Alibaba Partnership, Jack Ma will maintain an influential role in the company."

Chan has a price target of $225 and a "Buy" rating on Alibaba.

Last Friday, Ma was profiled by Bloomberg and said he wanted to follow the playbook of the billionaire and philanthropist Bill Gates after retirement.

Shares of Alibaba are down 13% this year.

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