Michael Burry Dumps Alibaba, Buys JD.com; Says Stock Must Halve Before Re-Entry
SingTao · 2 SOURCESabout 1 hour ago2 MIN
Summary
Alibaba Group (ticker: 9988) unveiled a landmark share placement on Monday, seeking to raise approximately 80 billion Hong Kong dollars through the issuance of 710 million new shares priced at 112.7 Hong Kong dollars each—an 8.4 percent discount to the previous Friday's closing price of 123 Hong Kong dollars. The fundraising, which would mark the largest follow-on equity offering in Hong Kong's history, is earmarked for investment in artificial intelligence infrastructure. The announcement triggered immediate market turmoil, with Alibaba shares tumbling more than 10 percent intraday to an intraday low of 110.1 Hong Kong dollars, before recovering slightly to close at 112.3 Hong Kong dollars, still down more than 8 percent.
Key Points
- Michael Burry, the American hedge fund manager celebrated for his prescient short bet against the United States subprime mortgage market, declared on his Substack platform that he cannot support Alibaba's share issuance
- Burry disclosed he has completely liquidated his Alibaba position and used the proceeds to establish a substantial long position in JD.com (ticker: 9618)
- The investor had previously disclosed his Alibaba holding in April 2024, and revealed in June that he sold the position due to tax-loss harvesting, though he indicated at that time he would repurchase the stock
- Burry stated he originally intended to reinvest most of his capital into Alibaba within one to two months, but has now abandoned that plan, saying he would only consider buying again if Alibaba shares decline by approximately 50 percent
- The fund manager cited concerns that Alibaba's return on invested capital (ROIC) will continue to deteriorate
Why It Matters
The billionaire investor's decisive rejection of Alibaba's AI-driven capital raise highlights escalating investor skepticism about the financial wisdom of major technology companies' artificial intelligence spending programs. Alibaba reported a 75 percent year-over-year decline in earnings for the quarter ending June 2024, while simultaneously increasing AI-related capital expenditure—raising fundamental questions about shareholder value creation in the hypercompetitive AI era. Burry's high-profile dumping of Alibaba and pivot to rival JD.com signals a broader reassessment of Chinese internet sector valuations among sophisticated international investors .
The billionaire investor's decisive rejection of Alibaba's AI-driven capital raise highlights escalating investor skepticism about the financial wisdom of major technology companies' artificial intelligence spending programs. Alibaba reported a 75 percent year-over-year decline in earnings for the quarter ending June 2024, while simultaneously increasing AI-related capital expenditure—raising fundamental questions about shareholder value creation in the hypercompetitive AI era. Burry's high-profile dumping of Alibaba and pivot to rival JD.com signals a broader reassessment of Chinese internet sector valuations among sophisticated international investors .