At the Citi-sponsored Global Tech Conference Tuesday, Alibaba Group Holding Ltd. (NYSE: BABA) said that China’s consumers are spending less and that will put downward pressure on fiscal second-quarter results. Needless to say, the stock dived, dropping as much as 7% in about 45 minutes.

Just last week Alibaba’s founder and chairman, Jack Ma, and the company’s vice-chairman, Joseph Tsai, were reportedly attempting to borrow more than $2 billion using Alibaba shares as collateral. Some of the money was said to be headed toward an investment vehicle set up by Tsai’s family a decade ago.

That did not help the company’s shares, but the comments on slowing growth in China are a much bigger problem for the online retailer. In the company’s fiscal first quarter that ended in June, gross merchandise value (GMV) rose 34% year over year and 12% sequentially. Mobile GMV rose from 33% of all sales a year ago to 55% and from 51% in the fourth quarter of fiscal 2015, which ended in March.

Now the company is saying that the September quarter’s GMV is likely to be down by mid-single digits compared with its prior expectations. The trouble, according to the company, is that shoppers are spending less per order, even though traffic is steady.

The problem with that conclusion, of course, is that traffic should be growing and apparently it is not. When an Internet company stops showing user growth, there is generally some fundamental issue that needs fixing and that the company has either failed to address or addressed unsuccessfully.

Alibaba may have tried to front-run this issue by announcing a $4 billion share buyback at the end of the last quarter. That struck us as pretty odd at the time, and it illustrates the danger to investors in a dual-class stock company. Alibaba’s founders and executives have absolute control of the company. That makes it even more important holders of American depositary shares (ADSs) and ordinary shares continue to see growth. What else is there?

Alibaba’s ADSs now trade well below the initial public offering (IPO) price of $68 and nearly half their post-IPO high of $120.00. The 52-week low is $58.00. In the early afternoon, shares traded at $62.95, down about 1.5% on the day.

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