A box office star in Asia whose directorial debut, So Young, broke Chinese records in 2013, Vicki Zhao Wei has helped Alibaba Pictures Group regain some ground after it stumbled following revelations of accounting irregularities last year. The actress and helmer has taken a 9.18% stake in the Hong Kong-based film division of e-commerce giant Alibaba Group Holdings. The $400M investment reportedly makes Zhao the second largest shareholder and is seen as good news for a company which has experienced a fair few headaches since it was rechristened last year after Alibaba bought 60% of what was previously ChinaVision Media. Bloomberg reports the unit rose the most it has in five months on the news involving Zhao (who purchased the shares with her husband via their Gold Ocean Media). It closed up 5.1% in Hong Kong trading on Tuesday with a $4.5B market capitalization — more than five times its value when Alibaba announced plans to acquire the company in March.
The news comes as Alibaba Pictures Group issued a profit warning to shareholders and potential investors late Monday. (It also comes as Wall Street waits to learn today what Yahoo plans to do with its $40B stake in parent Alibaba, whose shares are up in early morning NY trading.)
In an announcment to the Hong Kong stock exchange, the Alibaba Pictures board said last night that the company expects to record a loss of HK$600M ($77.4M) for the year ended December 31, 2014, with revenue expected to decrease “significantly” compared to 2013. The decline was put down to delays in distribution of certain TV drama series; the cancellation/delay of some motion pictures; and a decrease in magazine advertising and distribution revenue as a combined result of the downturn in the industry and personnel changes. Alibaba did not elaborate further. The operation recently greenlit its first movie since the acquisition, the Wong Kar Wai-produced The Ferryman.
Before Alibaba acquired it, ChinaVision Media previously produced 2013 Chinese blockbuster Journey To The West: Conquering The Demons which made $200M locally. It also backed 2014 Zhao-starrer Dearest which debuted as a special presentation in Toronto, and went on to gross $55M in the Middle Kingdom. Zhao’s credits also include Shaolin Soccer and Red Cliff. She and Alibaba Group and Alibaba Executive Chairman Jack Ma “are pretty close,” an RHB Research Institute analyst told Bloomberg. “Ma hasn’t had much experience in the movie business before so he would need help from people in the industry.”
As Alibaba digs deeper into the entertainment business, there are indeed lessons to be learned from Alibaba Pictures Group’s first year. In August, the company said it had discovered possible accounting irregularities which last month were revealed to have been misstatements about taxes and the financial impact of convertible bonds. Those incidents occured before Alibaba acquired and renamed the company, and the revelation of the potential irregularities did not seem to impact the parent group’s record $25B IPO.
But could the problems that have arisen since the formation of Alibaba Pictures Group reflect badly on the parent company’s ambitions in the U.S. movie biz? When revelations about the irregularities were first disclosed, some investors raised questions about due diligence in the ChinaVision acquisition, the Wall Street Journal noted last month. But people who know Alibaba well say that Ma is in less of a hurry to make forays into Hollywood than he seemed to be in October when he met with execs from all of the major studios. As Deadline noted last week, Ma is playing a long game when it comes to Hollywood, having hired someone to investigate the business. At home, he’ll now have Zhao to consult.