Trip.com's 22% Plunge: A Regulatory Overhang or a Buying Opportunity?

The catalyst is a formal antitrust probe. On Wednesday, China's State Administration for Market Regulation (SAMR) announced it has opened a case to investigate Trip.com due to "suspected abuse of its dominant market position and monopolistic practices". The move, based on preliminary reviews and the Anti-Monopoly Law, is a direct enforcement action aligned with the regulator's draft guidelines for platform economy oversight. The company's standard response is to actively cooperate and state that business operations remain normal.

The market reaction was severe and immediate. On Thursday, Hong Kong-listed shares of Trip.com plunged, with the stock sliding as much as 21.7% to HK$446 before narrowing to around 17%. Another report noted a 22% drop to the same low, marking the worst performance in the Hang Seng index that day. This move sent the stock to its lowest level since June 2025 and put it on track for its worst intraday drop ever. The sheer magnitude of the sell-off-nearly a quarter of its value evaporating in a single session-signals that investors are pricing in significant near-term risk from the regulatory action.

Quantifying the Risk: Penalty Range and Market Context

The probe's financial teeth are defined by China's Anti-Monopoly Law, which allows fines of between 1% and 10% of a company's annual sales from the previous year. For Trip.com, this creates a potential penalty range that is substantial relative to its scale. Based on its reported 2024 revenue, the fine could fall between approximately 533 million yuan and 5.3 billion yuan. That top end represents a multi-billion-yuan hit, a figure that would be material to the company's balance sheet and could pressure its capital allocation for years.

This investigation is not a random audit. It targets a company that operates at a scale that makes it a natural focal point for regulators. Trip.com holds a commanding dominant market position, with more than half of the online travel market share in China as measured by gross merchandise value. Its brands-Ctrip, Qunar, and Skyscanner-form a vast ecosystem that touches nearly every corner of the travel booking process. This sheer size and reach are precisely what the regulator's draft guidelines for the platform economy are designed to scrutinize. The probe is part of a broader push to ensure fair competition, potentially reshaping how large platforms interact with their partners.

The lack of specific allegations is itself a risk factor. While the company actively cooperates and says operations are normal, the absence of details means the market must price in the full spectrum of possible outcomes, from a minor inquiry to a major restructuring. The investigation's mechanics are clear: it follows preliminary reviews under the Anti-Monopoly Law. The precedent is set by the record 18.2 billion yuan fine levied against Alibaba in 2021 for similar violations. For now, the penalty range is a concrete number, but the path to that outcome remains shrouded in regulatory uncertainty.

The Counter-Argument: Growth Momentum and Valuation

The regulatory probe is a stark headline, but it does not erase the company's operational reality. Trip.com's most recent financial report shows a business firing on all cylinders. For the first quarter of 2025, net revenue surged 16% year-on-year to RMB13.8 billion. More specifically, accommodation reservation revenue increased 18% from the same period last year. This demonstrates underlying demand resilience, even as the company navigates a complex regulatory environment.

The growth story is particularly strong internationally. The company's global platform is expanding rapidly, with overall international reservations on its OTA platform increasing by over 60% year-over-year in Q1 2025. Inbound travel bookings, a key metric for China's tourism recovery, surged by around 100% year-over-year. Outbound bookings have also rebounded strongly, reaching more than 120% of pre-COVID levels for the same period in 2019. This international momentum provides a powerful counter-narrative to the domestic regulatory overhang.

Domestically, the recovery is gaining traction. Chinese tourism is showing clear signs of life, with domestic travel during the Chinese New Year 2025 holiday period up 5.9% year-on-year. This suggests that the core market is not only stable but expanding, providing a solid foundation for the company's domestic operations.

The bottom line is a valuation that now reflects only the regulatory risk, while the financial engine continues to accelerate. The stock's 22% plunge has compressed its price-to-earnings multiple to levels that may not fully account for this robust growth trajectory. For an event-driven strategist, the setup is clear: the probe creates a temporary mispricing. The company's fundamental strength-evident in its 16% revenue growth and explosive international bookings-remains intact. The question is whether the market will soon reprice the stock to reflect this operational reality, or if the regulatory uncertainty will persist and overshadow the good news.

Catalysts and Near-Term Watchpoints

For an event-driven strategy, the key is to identify the specific, near-term events that will either validate the regulatory risk or reveal the stock's mispricing. The probe itself is a catalyst, but its resolution timeline and the company's operational performance in the coming weeks will determine the trade's outcome.

The first concrete watchpoint is the investigation's own timeline. While the regulator has not set a deadline, the probe is based on preliminary reviews and follows the Anti-Monopoly Law. The market will look for any official communication from SAMR in the coming weeks that provides more detail on the allegations. The absence of specifics has fueled the sell-off, so clarity on the scope-whether it's about commission structures, data usage, or partner exclusivity-could narrow the penalty range and reduce uncertainty. A resolution or significant update is a plausible catalyst by late Q1 2026, which would be a major de-risking event.

The next major data point is Trip.com's Q4 2025 earnings report, expected in February 2026. This report will be critical for gauging the probe's operational impact. Investors need to see if the company's robust growth trends-like the 16% year-on-year revenue surge in Q1 2025-are continuing unabated. Any commentary from management on the investigation's effect on bookings, partner relationships, or costs will be scrutinized. The report should also provide a clearer picture of the international rebound, with inbound travel bookings having surged around 100% year-over-year in Q1 2025.

Beyond the earnings, two other near-term signals will offer early warnings. First, monitor the implementation of SAMR's draft guidelines on the platform economy, which are set to take effect on April 10, 2026. The probe into Trip.com is a direct enforcement action aligned with these guidelines. Any public statements from regulators or industry associations in the weeks leading up to that date could signal whether the crackdown is intensifying, providing a forward look at potential new compliance pressures.

Finally, track early travel data from the Chinese New Year holiday period, which runs from late January to mid-February. This is the year's largest domestic travel surge. If Trip.com's domestic bookings show weakness during this peak season, it could indicate that the probe is already chilling partner or consumer activity. Conversely, strong performance would reinforce the narrative that operations remain normal and that the regulatory risk is being overpriced.

The bottom line is that the stock's decline creates a tactical window. The setup hinges on these near-term catalysts: resolution clarity, continued earnings momentum, and early holiday demand signals. Any one of them could quickly reset the market's view of the risk/reward equation.