Alibaba Resignations: Is the Magic Gone?

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Interesting news coming from Alibaba.com (HKEx: 1688), where CEO David Wei and COO Elvis Lee (guess he’s having a blue start to his Year of the Rabbit!) have resigned to take responsibility for systemic problems that led to unspecified falsified vendors on its B2B marketplace. Stock took a bit of a beating today, down more than 3 percent on the news. Question is: is there more to this than meets the eye? Truth be told, I wouldn’t be surprised. The company has repeatedly said that new user growth is slowing and that it needs to move up the value chain (i.e. get existing customers to pay more for premium services) to keep growing. I suspect this case may involve fabricated customers designed to keep the flagging user growth looking respectable. If that’s really the case, this company could be a good one to stay away from, at least until there’s more clarity out there.

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