Chinese e-commerce giant Alibaba surprised the Wall Street when it revealed in a regulatory filing that it had quietly purchased about 33 million shares of the US group-buying site Groupon. As of December 2015, the Chinese company owned 5.6% stake in Groupon. The shares were purchased on the open market even without informing the Chicago-based company. Groupon shares skyrocketed 21.76% to $3.53 in early trading Monday.
Groupon was unaware of it
The disclosure came shortly after Groupon reported fiscal fourth-quarter results that exceeded analysts expectations. A Groupon spokesman said his company was not aware that the Hangzhou-based company was buying its shares until it saw the regulatory filing. The requirement of a regulatory filing was triggered after Alibaba’s stake crossed the 5% threshold.
Investors are excited about a strategic partnership between the two companies or an outright takeover bid. But why would Alibaba want to acquire a stake in Groupon, a faded star? Wedbush Securities analyst Gil Luria said the Chinese company has been investing in several US companies including Lyft, MagicLeap, Snapchat and Jet.com. These purchases could be Alibaba’s strategy to understand the US market as it is expanding internationally.
Is Alibaba looking to acquire Groupon?
Another possibility is that the Jack Ma-led company could be looking to acquire Groupon. The US group-buying site would be a small deal for the cash-rich Hangzhou-based company. The e-commerce behemoth could be interested in Groupon because of developments in its home country. Last month, Alibaba sold its entire 7% stake in Chinese group-buying and O2O company Meituan-Dianping for $900 million.
According to Doug Young of Forbes, Alibaba did not get along with top management of Meituan-Dianping. Its rival Tencent is now one of the largest shareholders of Meituan-Dianping, further complicating the matter. Baidu, another rival of the Jack Ma-led company, is also investing heavily in its group-buying site Nuomi. Alibaba lacks a strong partner in the group-buying market. Acquiring Groupon could help it re-enter the group-buying space and bring Groupon to China.