Chinese e-commerce giant Alibaba disclosed in an SEC filing late Friday that it had acquired 4.8 million class-A shares of Zulily for about $56 million, adding to millions of shares it already owned. At the end of its three-day buying binge at rock bottom prices last week, Alibaba owned 11.5 million Zulily shares. Shares of the U.S. online retailers rallied 12.67% to $13.30 when the Chinese company revealed its stake hike.
Alibaba not looking to acquire Zulily outright
Seattle-based Zulily hosts flash sales of clothing and other goods primarily aimed at women and children. The Hangzhou-based e-commerce giant now owns 9.3% stake, valued at $156 million, in Zulily. Alibaba had not previously disclosed its earlier stake of less than 5%. The class-A shares that Alibaba acquired has only a tenth of the voting rights of the restricted class-B stock, which is largely owned by the company’s founders.
Sources familiar with the matter told The Wall Street Journal that Alibaba was not looking to acquire Zulily outright. The U.S. company’s dual-class stock structure will make it difficult for the Chinese company to buy it without the consent of its management team. Alibaba has now become one of the largest owners of class-A shares in the U.S. e-commerce firm. At the end of March, Fidelity Investments held 8.6 million class-A shares of Zulily.
Alibaba doubles down when others are leaving
Alibaba is doubling down while many other investors are leaving Zulily. The Seattle-based company went public in late 2013 at $22 per share. Within months, its stock skyrocketed to $70 when the company was showing strong growth in revenue. However, its disappointing quarterly results have hurt the stock badly. On May 6, Zulily reported weaker than expected sales for Q1, 2015 and lowered its guidance for the full-year. Its stock has declined more than 42% year-to-date.
Alibaba has invested in a lot of U.S. companies over the past few years, and opened its own U.S. retail site 11 Main. Last year, it invested $15 million in luxury site 1stdibs. Alibaba invested $200 million in Snapchat earlier this year. It has also made a $215 million investment in the mobile messaging service Tango. In 2013, Alibaba led a $206 million funding round in ShopRunner. Last month, reports surfaced at Alibaba has secretly invested in Jet.com, the would-be rival of Amazon.
Alibaba shares fell 0.36% to $86.75 in pre-market trading Monday.