Michael Burry, the investor known for his prescient bets ahead of the 2008 financial crisis, has exited his position in Alibaba Group Holding Ltd. and established a significant stake in JD.com Inc., citing valuation concerns. The move follows Alibaba's announcement of a secondary share offering in Hong Kong, which raised HK$80 billion (US$10.2 billion) at HK$112.70 per share to fund artificial intelligence and cloud infrastructure investments.
Alibaba reported a 75% drop in quarterly profit for the period ending in June, despite 9% revenue growth, as the company increased spending on AI initiatives. The company's shares in Hong Kong closed at HK$123 the Friday prior to the offering announcement, while its U.S.-listed ADRs fell 8.6% that day. Year-to-date, Alibaba's ADRs have declined 18.6%, and its Hong Kong-listed shares are down 13.9%.
Burry, who had disclosed a new position in Alibaba in April, criticized the company's equity issuance in a Substack post, stating, "I cannot endorse stock issuances." He argued that Alibaba's return on invested capital would likely continue to decline and that the stock would need to drop roughly 50% before he would reconsider investing. Burry described his new stake in JD.com as "large" and indicated no immediate plans to return to Alibaba.
