Published - January 17, 2023 @ 11:59 AM (EET)
In a rare case of activism targeting a prominent Chinese firm, meme stock investor Ryan Cohen has built a stake in Alibaba Group Holding Ltd (NYSE:BABA) worth hundreds of millions of dollars.
According to the Wall Street Journal report, Mr. Cohen is privately pushing the Chinese e-commerce giant to accelerate and further boost its share-repurchase program by another $20 billion, to roughly $60 billion.
Mr. Cohen, known for helping ignite explosive rallies in GameStop Corp (NYSE:GME) and others, built the stake in the second half of last year, according to people familiar with the matter.
Though the stake is small compared to Alibaba's market capitalization of $300 billion, the entrepreneur has a broad following among retail and individual investors who often follow his lead.
In August, after championing well-known but languishing stocks like Bed Bath & Beyond (NASDAQ:BBBY), Mr. Cohen contacted Alibaba's board to make the case its shares were deeply undervalued.
The figures are based on his belief that it can achieve double-digit sales and nearly 20% free-cash-flow growth over the next five years, the people said, confirming a Wall Street Journal Report.
WHY IT MATTERS
Following the news, Hong Kong-listed shares of the Chinese e-commerce leader jumped 3%.
While the stock later trimmed gains, it remains about 85% higher than its October slump on regulatory easing and China's reopening from Covid curbs.
Elsewhere, Alibaba's shares traded in the US have climbed about 67%, with its ADRs closing at $117.01 on Friday. Though the stock is still down from a high of over $300 in late 2020, shares are steadily recovering and winning back investors.
Managing director Vey-Sern Ling at Union Bancaire Privee said Cohen's entry is "positive for the stock because it helps to raise confidence, especially among Western investors who have been skeptical of China."
NOW WHAT
While it's unclear when Mr. Chohen took a specific interest in Alibaba, the entrepreneur noted his admiration for management's ability to grow earnings while assembling quality assets, the report added.
The activist intends to have a collaborative, long-term relationship with the e-commerce giant, and his "presence on Alibaba's board might help raise public shareholders' governance over the company's strategic decisions," said Bloomberg Intelligence analyst Catherine Lim.
