Michael Burry, the investor known for his prescient bets against the U.S. housing bubble, has exited his entire stake in Alibaba Group Holding Ltd. and established a significant position in rival JD.com Inc., citing valuation concerns and planned share issuances.
Burry initially disclosed a new position in Alibaba in April, with plans to reinvest following a short holding period. However, he reversed course after reassessing the company’s outlook and valuation trajectory. In a statement, Burry said he "cannot bless share issuances," referring to Alibaba’s planned HK$80 billion ($10.2 billion) share sale to fund artificial intelligence investments.
Alibaba priced its follow-on offering at HK$112.70 per share, an 8.5% discount to the prior day’s close of HK$123. The offering, described as Hong Kong’s largest follow-on share sale by a company, underscores the company’s capital-raising strategy amid shifting priorities. Burry indicated Alibaba’s return on invested capital is likely to continue declining and suggested shares would need to fall roughly 50% before he would reconsider his stance.
Alibaba’s financial performance has weakened this year. For the quarter ended June, profit plummeted 75% year-over-year, despite a 9% rise in revenue, as the company ramped up spending on AI initiatives. The company’s U.S.-listed ADRs have declined 18.6% over the past 12 months, including an 8.6% drop on Friday. Hong Kong-listed shares have fallen 13.9% year-to-date.
Burry’s strategic shift reflects broader investor skepticism toward Alibaba’s valuation amid heavy investment outlays and competitive pressures in China’s e-commerce sector. JD.com, the beneficiary of Burry’s repositioning, has emerged as a focal point for value-focused investors seeking alternatives in the region’s retail technology landscape.
