Michael Burry Says He Sold Alibaba, Calling It Overvalued Ahead of $10.2 Billion Share Sale
Key Takeaways
- •Michael Burry said he exited Alibaba and built a large position in JD.com instead.
- •He described Alibaba shares as overvalued and said he would need the stock to fall by half to become interested again.
- •Alibaba plans to raise about HK$80 billion through a share sale to fund artificial intelligence investments.
- •The offering would be Hong Kong’s largest follow-on share sale by a company on record and would dilute existing shareholders.
- •Alibaba reported a 75% decline in quarterly profit as it increased AI-related capital spending, and its shares have fallen this year.
Michael Burry says he has sold his stake in Alibaba Group Holding Ltd., calling the Chinese tech giant's shares overvalued and disclosing that he exited the position in order to build a “large” stake in rival online retailer JD.com Inc.
“I planned to move most of it back after a month or two. No longer,” Burry wrote in a post on Substack, adding that Alibaba's share price would have to “fall by half for me to get interested again.”
The remarks by the Scion Capital Management founder — made famous in The Big Short for his bets against the US housing market ahead of the 2008 global financial crisis — follow Alibaba's announcement that it plans to raise about HK$80 billion ($10.2 billion) through a share sale to fund its AI investments, an offering that would rank as Hong Kong's largest follow-on share sale by a company on record. Such offerings increase the number of shares outstanding, diluting the ownership stake held by existing shareholders.
“I cannot bless share issuances,” Burry said, adding that he expects the company's return on invested capital to continue declining.
Alibaba reported a 75% profit decline for the quarter ended in June as it ramped up AI-related capital spending, further unsettling investors about future returns from the Chinese tech sector. The company's American Depositary Receipts are down 18.6% for the year and fell 8.6% Friday. Its Hong Kong-listed shares are down 13.9% for the year so far.
Burry had disclosed in April that he built a new position in Alibaba. The Chinese firm said separately on Sunday that it priced the offering at HK$112.70 per share, about 8.4% below the Hong Kong market closing price of HK$123 on Friday — the kind of discount issuers commonly offer to place large blocks of new shares with buyers.
This story was originally published by Fortune.
