Mediaboss Marketing

Robert Way

Alibaba Group's (NYSE:BABA) recent strategic shift to a "1+6+N" governance structure marks a pivotal turning point in its 24-year journey. This groundbreaking move will evolve Alibaba from a monolithic entity into a holding company supervising six key business segments and a myriad of other enterprises. This innovative model is designed to foster enhanced autonomy, innovation, and agility, whilst mitigating regulatory pressures. This article delves into the intricate details of this transformation, its potential impact on stakeholders, and how it positions Alibaba in the rapidly evolving digital landscape.

Alibaba's decision to switch to a new "1+6+N" governance structure is a critical milestone in the company's 24-year trajectory. This transformation will morph Alibaba from a solitary unit into a holding company ("1") supervising six primary business segments ("6") and an assortment of other businesses ("N").

These six principal segments encompass Cloud Intelligence, Taobao and Tmall, Local Services, Alibaba International Digital Commerce (AIDC), Cainiao Smart Logistics Network, and Digital Media and Entertainment. The "N" denotes various other businesses such as Alibaba Health, Sun Art Retail, and Freshippo.

Every entity within the "6+N" structure will form its own board of directors to provide guidance and support to the respective business CEOs. This decentralization is projected to spur increased autonomy, innovation, and nimbleness within each segment. Meanwhile, Alibaba Group, as the holding company, will concentrate on capital management, fostering the growth of these diverse entities, and promoting the inception of innovative new businesses.

These units are permitted to raise external capital with a possibility of future initial public offerings. Only the China e-commerce unit, Taobao Tmall Commerce Group, will stay entirely within Alibaba's ownership.

We believe that Alibaba's strategy to potentially fragment the company into several entities might alleviate government apprehensions about the consolidation of power and influence among China's internet giants.

The market responded positively to the announcement, as Alibaba's U.S.-listed shares saw a surge of over 14 percent post-announcement.

From our perspective, Alibaba's strategic roadmap highlights its progressive stance in leveraging the opportunities emerging from the rapidly growing digital transformation. The corporation is capitalizing on the fast-paced trend of online shopping, the integration of revolutionary technologies like generative AI, and a restructuring of its organizational and governance framework to stimulate ingenuity, adaptability, and amplify shareholder value.

The firm's three strategic cornerstones - consumption, cloud, and globalization - outline a holistic strategy to capture market opportunities. Alibaba's concentration on the growing consumption power, in China and across the globe, signifies its commitment to expanding its consumer base. In our opinion, for example, the improvements to its supply chain capabilities and the reshaping of the Taobao app from a transaction-focused platform to a center for shopping exploration are unmistakable signs of Alibaba's quest to elevate customer experiences.

Furthermore, Alibaba's focus on its Cloud Intelligence division, a substantial player in the worldwide cloud computing market, exhibits its determination to solidify its standing in this crucial sector and stimulate additional growth. The emphasis on global expansion, especially in the e-commerce sector, represents a strategic maneuver to exploit the vast potential of international markets.

Significantly, Alibaba's investment in Cainiao to create a diversified delivery network is a key move towards bolstering its service capabilities. This focus on logistics and delivery highlights the company's commitment to delivering a dependable and efficient shopping journey for its customers.

For anyone unfamiliar with the situation, a quick search for "Alibaba China troubles" on Google will provide a multitude of results detailing the company and its founder, Jack Ma's, challenges in China. While we won't delve into the specifics here, the crux of the matter appears to have originated from Jack Ma's criticism of the Chinese government, leading to his declining favor. This, coupled with a less robust recovery of China's economy from the COVID lockdowns than anticipated and the country's rising geopolitical conflicts with the U.S., encapsulates the situation.

In our view, the company's significantly discounted valuation can largely be attributed to the above-mentioned factors. However, we believe sentiment has swung so firmly into negative territory that the market has been slow to respond to favorable developments on all three fronts.

We believe the previously discussed company restructuring is a move that indicates the normalization of regulatory support for China's tech industry and private businesses after an extended period of strict control. The restructuring news coincided with co-founder Jack Ma's return to mainland China, a move that many interpret as a planned media event to lift market sentiment. Ma's presence is often seen as a gauge of the Chinese government's backing for private business.

The Chinese government is now keen to boost growth and restore confidence in the tech sector and the broader economy following three years of rigorous COVID-19 controls. Chinese leader Xi Jinping has urged the government to support private businesses and called on entrepreneurs to enhance growth and tech innovation. Premier Li Qiang, a close ally of Xi, has initiated a series of measures to mend relations between the government and the private sector.

We understand that despite evident indicators suggesting an improvement in the regulatory and macroeconomic landscape, this issue continues to be a primary concern for investors. However, we are cautiously optimistic that these headwinds will lift, resulting in multiple expansions for Alibaba.

Note: All historical data in this section comes from the company's filings, and all consensus numbers come from FactSet.

Our analysis of Alibaba's latest earnings and financial trends reveals a company that has weathered a difficult period but is now showing signs of a potential turnaround. BABA posted a stellar Q1 earnings report, with a 6.8% y/y revenue growth to $32.5 billion, surpassing consensus estimates by 4.1%. The stock responded positively, climbing 4.6% the day after earnings were announced. Elevated gross and operating margins of 39.2% and 18.2%, respectively, coupled with a 39% y/y rise in EPS to $2.41, signals strong operational efficiency and profitability.

While it's true that BABA's revenue CAGR of 20.1% over the past three years outpaced its EPS growth CAGR of 1.5%, this is not necessarily a red flag. Rather, it could suggest the company is investing in future growth. Consensus forecasts are also favorable, predicting an upward trend with revenue growth of 6.9% and 9.7% for the next two fiscal years, reaching $132.1 billion and $144.9 billion, respectively.

Yes, the EBIT margin has seen a decrease from 18.0% to 11.6% over the past three years. However, it's important to note that the street is forecasting a significant bounce back, with margin expansion to 14.1% and 14.5% for the next two fiscal years. This indicates the belief in BABA's ability to improve profitability. With capex as a percentage of revenue averaging 7.3%, BABA is certainly investing in its infrastructure, which could underpin future growth.

Although the free cash flow margin has decreased from 29.6% four fiscal years ago to a forecasted 16.1% this current fiscal year, BABA still produced an average FCF margin of 21.5% over the past four fiscal years, showcasing its cash-generating capability. With a solid net cash position of $50,172 million, BABA's balance sheet remains sturdy.

While BABA underperformed the S&P 500 by 16 percentage points over the past year, it's noteworthy that the stock is trading 2.1% above its 200-day moving average and 62% above its 52-week low. This could indicate a turning point and the beginning of a positive trend.

In terms of valuation, BABA presents an attractive proposition. It trades at a significant discount to the S&P 500, with an EV/Sales discount of 47.8%, an EV/EBIT discount of 49.1%, a P/E discount of 44.5%, and an FCF discount of 53.7%. Additionally, BABA's P/E multiple of 10.3 is historically low compared to its 5-year mean of 20.7. This offers a compelling entry point for investors.

When we consider its peers, BABA appears even more enticing. JD.com (JD) and Amazon (AMZN) are trading at forward 12-month P/E of 10.6 and 48.0, respectively, making BABA's multiple seem particularly appealing.

Alibaba's strategic transformation is a testament to its forward-thinking approach and responsiveness to changing market dynamics and regulatory landscapes. It highlights the company's commitment to enhancing shareholder value while fostering innovation and business agility. Alibaba's strategic roadmap is not just about restructuring its governance model; it is about reimagining its business to better leverage the opportunities of the digital age.

While regulatory concerns and geopolitical tensions remain a significant hurdle, the company's restructuring efforts and the Chinese government's renewed focus on supporting private businesses suggest a possible easing of these headwinds. This, coupled with the company's robust financial performance and undervalued proposition, makes Alibaba a compelling investment proposition.

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Alibaba's Transformation: A New Era Of Decentralization And ... - Seeking Alpha

Bitcoin is a digital currency that operates on a decentralized network of computers, without the need for a central authority or intermediary. Bitcoin ETFs are exchange-traded funds that track the price of bitcoin and allow investors to gain exposure to the cryptocurrency without having to buy, store, or manage it themselves.

There are several potential benefits of investing in bitcoin ETFs, such as:

Liquidity: Bitcoin ETFs trade on regulated stock exchanges, which means they have high liquidity and can be easily bought and sold throughout the day.

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Diversification: Bitcoin ETFs can offer investors a way to diversify their portfolio and hedge against inflation, currency devaluation, or geopolitical risks.

Simplicity: Bitcoin ETFs eliminate the hassle of dealing with bitcoin wallets, exchanges, or custodians, which can be complex, costly, or insecure.

Tax efficiency: Bitcoin ETFs may have lower tax implications than directly owning bitcoin, depending on the jurisdiction and the type of fund.

However, there are also some drawbacks of investing in bitcoin ETFs, such as:

Fees: Bitcoin ETFs charge management fees and other expenses that reduce the returns for investors. These fees may vary depending on the fund provider and the structure of the fund.

Tracking error: Bitcoin ETFs may not perfectly replicate the performance of bitcoin, due to factors such as market volatility, liquidity constraints, or regulatory issues. This means that the price of the fund may deviate from the price of bitcoin over time.

Regulatory uncertainty: Bitcoin ETFs are subject to the rules and regulations of the jurisdictions where they are listed and traded, which may change or differ from those governing bitcoin itself. This creates uncertainty and risk for investors, especially in countries where bitcoin is not widely accepted or legal.

Limited availability: Bitcoin ETFs are not widely available in many markets, as they face significant regulatory hurdles and skepticism from authorities. As of August 2023, only a few countries have approved or launched bitcoin ETFs, such as Canada, Brazil, and Germany.

Decentralization means that no single entity or authority has control over the network, the transactions, or the governance of the system. Instead, the power is distributed among the participants, who can verify, validate, and contribute to the network in a transparent and democratic way.

Why is decentralization important for the cryptocurrency industry? There are several reasons:

Decentralization enhances security. By eliminating the need for intermediaries or central servers, decentralization reduces the risk of hacking, censorship, or manipulation. The network is protected by cryptography and consensus mechanisms that ensure its integrity and reliability.

Decentralization promotes innovation. By allowing anyone to participate and contribute to the network, decentralization fosters a culture of creativity and experimentation. The network can evolve and adapt to the changing needs and preferences of the users, without being constrained by bureaucratic or regulatory barriers.

Decentralization empowers users. By giving users more control over their own data, assets, and identity, decentralization enhances their privacy and sovereignty. Users can choose how to interact with the network, what services to use, and whom to trust, without relying on third parties or intermediaries.

The cryptocurrency industry will only become better as it becomes decentralized. Decentralization is not only a technical feature, but also a social and economic vision. It is a vision of a more open, fair, and inclusive world, where everyone can benefit from the opportunities and advantages of digital currencies.

Bitcoin ETFs are a convenient, decentralized and accessible way for investors to gain exposure to the cryptocurrency market, but they also come with some challenges and risks. Investors should weigh the pros and cons of investing in bitcoin ETFs carefully before making a decision.

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Bitcoin ETFs will enhance Crypto Market Decentralization - Tekedia

Decentralized financial applications, abbreviated as DeFi, use blockchain technology to make financial services more accessible and transparent. Since its initial release, DeFi has seen many revisions, and the most recent is DEFI 2.0.

DeFi 1.0 emerged around 2018, allowing individuals to borrow, lend, trade, and perform P2P financial transactions on various blockchains like Ethereum without intermediaries being involved. Initial use cases for DeFi 1.0 included decentralized token trading platforms like Uniswap, interest-bearing loan platforms like Aave, and stablecoins like DAI that maintain their value relative to fiat currencies.

The main benefit of DeFi 1.0 was that anyone could use these applications on the blockchain without any permission, boosting the accessibility and transparency of financial services. Some of the issues that hindered the spread and adoption of DEFI 1.0 were Slow speeds, high gas prices, and an inability to scale

DeFi 2.0 aspires to construct scalable, low-cost, and highly efficient decentralized financial systems. While still keeping a firm commitment to decentralization and transparency, DeFi 2.0 aims to make decentralized finance more accessible and usable by removing technological impediments.

Cross-chain bridges enable DeFis functionality in a multi-chain environment by facilitating the exchange of value and information between blockchains, and layer 2 scaling solutions like zero-knowledge rollups that perform transactions off-chain to reduce congestion and gas fees on root blockchains like Ethereum are also important innovations.

Community-controlled models in economics and software development are made possible by consensus mechanisms like proof-of-stake upgrades and decentralized autonomous organizations, resulting in lower energy consumption and faster transaction times. Major banks use cryptographic products such as centralized stablecoins, derivatives, and lending platforms.

DeFi 2.0 intends to increase efficiency, interoperability between blockchains, speed, cost, and the user experience by innovating in these areas. Proponents think that the wider adoption of decentralized financial systems will benefit from this.

However, proponents of DeFi 1.0 argue that new features in DeFi 2.0 could undermine the decentralization and openness that attracted users in the first place. Centralized stablecoins or intermediaries may bring back the same issues that plagued centralized finance in the first place.

It seems that both DeFi 1.0 and DeFi 2.0 play important roles in propelling widespread acceptance of decentralized finance. Demand for accessible financial services was underlined, and the foundations of DeFi 1.0 technology were laid. At the same time, DeFi 2.0 is providing important technical advancements that may allow decentralized finance to develop stably without losing its community-oriented ethos.

DeFi 1.0 and 2.0 are not alternatives but rather supplementary iterations of the same ecosystem. DeFi 2.0 expands on previous efforts to make decentralized finance a more open and transparent alternative to traditional monetary systems.

Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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DeFi 1.0 and 2.0: Understanding the Phases of Decentralized Finance - The Coin Republic

One of the perennial issues with blockchain networks is keeping decentralization intact. With crypto staking coming into play with the expansion of decentralized finance (DeFi), centralization over networks such as Ethereum became an issue. The notion of self-limiting the staking to 22% was introduced to ensure no staker holds prominence over the blockchain. Ethereum staking pools are taking interest in the initiative now.

Ethereum Beacon chain community health consultant, Superphiz, brought to attention that several major ETH staking pools are committed or in the process of committing the validators self-limit to 22%. These stakers include Rocket Pool, StakeWise, Stader Labs, and Diva Staking.

In addition, Puffer Finance also reported to come forward to participate in the Ethereum validator 22% self-limiting initiative.

Decentralization is among the crucial characteristics of blockchains that sets them apart from traditional systems and gives them an extra edge. The community members ensure that it does not get breached or hampered by any means.

Since the second largest cryptocurrency network, Ethereum (ETH) transitioned from Proof-of-Work (PoW) to Proof-of-Stake (PoS) following the Merge upgrade last year, the staking activities increased heavily over the network. Though the upgrade was meant to enhance the blockchain for good, increase transaction speed and scalability, and bring down the gas fees. The threat of networks moving towards centralization started surfacing.

Ethereum co-founder Vitalik Buterin explained this as the blockchain trilemma where in an ideal blockchain network, it is difficult to hone security, scalability, and decentralization at once. One of the three always gets compromised in order to seek the others.

Though many blockchain networks in general seek to solve the blockchain trilemma in order to set up an ideal blockchain, the industry is yet to see one.

However, Superphiz brought the solution to counter the increasing threat of centralization on Ethereum. He proposed the idea of validators limiting their staking to 22%.

The Ethereum network requires 66% of validators to agree on proposals. If the upper limit is set to 22%, it would need at least four big staking pools to come to a consensus to make the blockchain racing finalization.

The crypto community might find it comforting that staking pools are accepting the self-limiting to 22%, but the elephant in the room still can not be left unnoticed.

According to the Dune Analytics data, Lido Finance holds the position of top Ethereum staker. It holds 8,516,934 ETH at the moment which accounts for 32.4% of all the stake in cryptocurrency. This is way higher than the anticipated staking limit.

For context, Coinbase is at the second spot with 2,289,369 ETH, 8.7% of the overall stake in Ethereum.

On top of that, the real issue is that Lido Finance showed no signals if they are considering self-limit. The Ethereum liquidity staking provider asked the community to vote on whether the platform should go with self-limit. In the result, 99.81% of the votes were in favor of no self-limiting.

So, if Lido continues to stay in line with the communitys expectations, it might not see a limit of 22% anytime soon.

Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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Ethereum Stakers Agree to 22% Self-Limit Seeking Decentralization - The Coin Republic

Bitcoin is a decentralized digital currency that was created in 2009 by the pseudonymous Satoshi Nakamoto. Unlike traditional fiat currencies that are controlled by central banks, Bitcoin operates on a peer-to-peer network with no central authority. An important aspect of Bitcoin's decentralization is how transactions are verified and new coins are minted through a process called mining. In the early days of Bitcoin, anyone with a computer could mine Bitcoin by running the open-source software and helping to validate transactions. However, as Bitcoin grew in popularity and value, mining became increasingly competitive and is now dominated by specialized hardware and large mining pools. The increasing centralization of Bitcoin mining into pools has raised concerns about impacts on Bitcoin's decentralization.

Bitcoin mining is the process by which new Bitcoins are entered into circulation and transactions are confirmed. Miners use specialized hardware to solve complex computational math problems and verify blocks of transactions. The first miner to solve the math problem adds the verified block to the blockchain and receives a reward of newly minted Bitcoins. This mining process secures the Bitcoin network and provides an incentive for miners to validate transactions. However, Bitcoin mining has become very resource-intensive over the years.

"When I first started mining Bitcoin on my home computer it felt like a collaborative effort with cryptographers around the world. Now it seems large mining companies are trying to centralize control," says Claire Davies, a crypto enthusiast who mined Bitcoin in her basement in 2010.

As more miners competed for new coins, the difficulty of Bitcoin mining increased. To better compete, miners started pooling their computational resources and sharing mining rewards. These Bitcoin mining pools allow miners to work together and receive consistent payouts for their contributions. Popular early mining pools included Slush Pool, AntPool, F2Pool, and BTC.com. By combining computational power, miners in pools stand a better chance of solving a block and getting rewarded more regularly in smaller amounts. Pooled mining now accounts for a significant portion of overall Bitcoin mining activity.

While mining pools seem like a sensible adaptation, they have led to concerns about centralization. With fewer groups controlling mining power, they could potentially unite and exert authority over the network. However, no single pool has exceeded 50% control, which would be needed for a 51% attack to manipulate transactions. Complex strategies like smart pooling algorithms help maintain decentralization by preventing small numbers of pools from gaining dominance. New decentralized mining protocols are also in development to allow individual miners to contribute meaningfully again. Overall, mining remains decentralized enough to securely uphold Bitcoin's mission, even if competition favors big players.

Bitcoin's underlying protocol is built for decentralization, but human behavior tends towards efficiency which can lead to centralization over time. Making mining more decentralized will depend on developing new technologies and incentivizing participation worldwide. Two approaches that could help are:

New protocols like BetterHash and Stratum V2 aim to give individual miners more choice over transactions and the ability to mine solo profitably. Making it feasible for average users to mine from home PCs or small operations promotes decentralization.

China currently dominates Bitcoin mining, but spreading infrastructure and mining farms worldwide makes collusion and manipulation more difficult. Encouraging miners in North America, Europe, and developing countries balances control.

In conclusion, Bitcoin was built as a decentralized system but faces challenges from centralized mining pools. With careful governance and new protocols, Bitcoin can retain its decentralization and resist consolidation among miners and other entities. The story of mining pools illustrates how human tendencies can sometimes conflict with decentralization principles. Maintaining Bitcoin's core values will require ongoing vigilance, creativity, and responsibility among developers and users alike.

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Decentralization and Bitcoin Mining Pools - BTC Peers