Why Are Alibaba Shareholders Concerned by Jack Ma's Departure Plan?

Change can be scary, but it seems peculiar to find trouble in the executive transitions that Chinese internet giant Alibaba (NYSE: BABA) announced on Monday. As Market Foolery host Chris Hill and senior analysts Jason Moser and Taylor Muckerman note, founder and Chairman Jack Ma gave a full year's notice of his plan to step down, and his successor will be CEO Daniel Zhang -- not exactly a radical move.

In this segment from the podcast, they talk about the direction the company is going, and the more relevant questions for investors and would-be investors in its stock.

A full transcript follows the video.

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This video was recorded on Sept. 10, 2018.

Chris Hill: Alibaba announced that Jack Ma is going to be the chairman of the board for precisely one more year, and that on Sept. 10, 2019, CEO Daniel Zhang is going to take over as chairman.

Of the three companies we're going to talk about with people on the move and the stocks are down, this is the stock move I don't quite understand. Yes, Taylor, transitions are tough, particularly at the highest level of the executive ranks. But this seems like Jack Ma is going out of his way to signal as far in advance as possible. And Daniel Zhang has been in the executive ranks for, I think, a decade, maybe even longer, starting as chief operating officer.

Taylor Muckerman: Yeah, he's been CEO since 2015.

Hill: Right. This seems like it should be as smooth a transition as possible.

Muckerman: Yeah, he's going out on his own terms. You look at him, he's only 54, I think. Maybe not as old as you would expect a founder-led company like this to depart. Kind of reminded me of Bill Gates taking himself out of the chairman role only a few years older than that, back in 2014. That company's still doing quite all right. You look at this company, doing very well on its own. I doubt he removes himself completely. Always be on the speed dial for whoever is in that chairman role moving forward. I'm not overly worried. I'm not a shareholder, but I wouldn't be overly worried at this news if I was.

Jason Moser: Yeah, I tend to agree. I think this is generally a non-issue for the company. It does look like volume is pretty high today. Sellers are coming out. Oftentimes, it can just boil down to simple institutional profit-taking. It's been a decent-performing investment, I think. Probably a little bit more earlier in its life as an IPO versus now.

For me, this is a strong company, I think, with good leadership, already very well established. But the question mark for a lot of us has always revolved around their organizational structure. It's just really difficult to fully understand who's in control of this business. While we talk about investing in China, and investing, often, in the market leaders in China, certainly Alibaba stands out as one of those. But you are taking on a modicum of risk in understanding fully how these companies are run and who really is in power.

With that said, I think that ultimately, this is a non-issue for the company. It's in good shape as it is.

Muckerman: Yeah, I think it just comes at a time when most of these Chinese tech stocks have been selling off over the last couple of weeks, with that whole market going south in the last few weeks as well.

Chris Hill has no position in any of the stocks mentioned. Jason Moser has no position in any of the stocks mentioned. Taylor Muckerman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.