Temasek Cuts Stake In Alibaba While Buying Rival Shares

Temasek Holdings pares its stake in Alibaba as it buys new shares of its domestic rival 'JD.com'

Alibaba Group Holding is the biggest and largest Chinese e-commerce company, which took over the online shopping space of the region by storm. Being one of the biggest tech firms in the world, several investors buy shares in it. One of the shareholders is Singapore’s Temasek Holdings Pte.

According to Bloomberg, the Singaporean investment firm has decided to cut back its stake in the Chinese online retailer ‘Alibaba’ in the fourth quarter. This move comes as Temasek Holdings buys shares of other Chinese tech companies that also includes Alibaba’s rival, JD.com.

It seems like Temasek dropped stake of Alibaba while buying shares of its domestic rival, which is rapidly improving its market position and is a real threat to Alibaba Group in China. Bloomberg added that the Singapore’s government-owned investment firm sold nearly 548,769 receipts of American depositary in the Chinese tech giant.

According to a filing with the US Securities and Exchange Commission, the group stated on Tuesday that it is left now with 47.5 million. The holding was previously valued at $1.03 billion, which significantly jumped to $3.86 billion when the shares rose by 38% in the fourth quarter.

Reports suggest that the new Temasek’s acquisitions include 6.1 million ADRs in JD.com, the closest competitor of Alibaba and 8.2 million ADRs in a renowned Chinese online travel company, called Tuniu Corp.

Temasek is confident of the future of China’s technology sector and industries. The investment firm first invested in Alibaba  in 2011 where it bought China registered shares valued at $36 million (S$50 million).

Amidst the dying economy of China, Alibaba struggled to grow its business in the past months. Jack Ma remained positive throughout though. On the other hand, its rival JD.com significantly grew its market share, which threatened the Chinese e-commerce giant and its position in the market. The year-on-year revenue growth of JD.com was 52% during the three months ended in September whereas Alibaba’s revenue growth was only 32% in the same duration.

Guo adds that it will be exciting to see the battle between two retail businesses of the country. Alibaba already has a strong market position but the massive growth of JD.com has lured customers toward its online marketplace.

Apart from the online tech firms, Temasek also holds stakes in different pharmaceutical companies that includes Gilead Sciences Inc. (1.4 million shares), BioMarin Pharmaceutical Inc. (888,545 shares), and Quintiles Transnational Holdings Inc. (639,172 shares). 

Alibaba Bought 5.6% Stake in Groupon

The online retailer has succeeded in buying a stake of 5.6% in Groupon for penetrating into the US E-commerce market

Alibaba Group Holding Limited has purchased 5.6% share in Groupon, turning it into the fourth biggest shareholder in the online deal webpage, a regulatory filing has recently revealed. The online retailer was required to file its stake as it had reached a particular limit.

This means that the Chinese electronic commerce company now owns 33 million shares of the American company. The shares of the Chicago based company were still decreased by 61% in the past one year, despite of an increase by 29% in the last week on Friday.

Apart from Groupon, the online trading giant has also purchased shares in other organizations such as tech start up Magic Leap, online retailer Jet.com and a transportation network enterprise Lyft. The Hangzhou based company has refused to share its views regarding the filing. In the meantime, spokesperson of Groupon Bill Roberts has stated the enterprise is not aware of the stake of Alibaba, not until the regulatory filing disclosed on 12^th February 2016.

On Thursday, the online dealer reported its final quarter results that succeeded in surpassing predictions made by analysts due to rising sales in the North American region. Groupon stated it recorded a profit of 4 cents per share, surpassing analysts’ estimations that the company would reach break-even point.

Groupon has stopped operating in 17 states and is presently operating in 28 as it has continued to do streamlining of its operations across the globe. It was previous known as one of the most popular Internet brands, becoming famous by following a business model that helped it play a role of a broker between consumers and conventional retailers, offering huge discounts from merchants such as movie theaters and restaurants.

It’s rapid growth took place at a time when the group purchasing sites in China boomed, and the US company used to be a Chinese group purchasing site’s co-owner in collaboration with China based internet company Tencent.

But that was followed by the fading of the group purchasing sector almost as rapidly as it grew, leading  the star of Groupon to get dimmed and number of its China imitators to enter the market .

In the later part of 2011, Groupon was successful with a high profile initial public offering when it used to be an emerging star, offering its shares at a price of $20 and reaching a market value of around $12 billion.

For a short period of time, it’s shares reached a price of $31 shortly after it began to trade in the stock market, but have decreased in terms of value since then due to its failure to find a method to increase and recorded lackluster growth of revenue.

Even after the huge rise in recent times, its shares are now trading at around 85% less than their IPO level.

Alibaba Share Could Reach $125

Alibaba's share might reach another height. Investors should think of long term investment in Alibaba.

In the midst of all the controversies and Alibaba Group Holding’s share going 20 percent this year, we still have faith in the e-commerce giant and believe that its share will increase and it has the potential for it.

Latest Alibaba news is that the company’s valuation is highly compelling. Its shares have been variant and struggling since the beginning. And there have been reports of Alibaba merchants performing fraudulent activity with government agency had become a dead end too.

The most uncertain factor for the quarter is monetization. The take rate has been missing the last year for desktop as the changes were made in the performance ranking algorithms and ad targeting ones. As the performance gets better, it should attract advertisers in large amount and also the factor of a better price with time but in the near term, the management is not expecting ricochet which is that conclusive. The expectations of the investors have been shrunk due to this.

Fraud and identity theft related activities are not an issue highly happening to Alibaba or only in the region of China. It occurs anywhere there are high chances of large transactions to happen. A marketplace with more than a merchandise value of $366 billion and active buyers that are up to 334 million is experienced by Alibaba. Also, Alibaba news report that it saw 8.5 million merchants last year.

The view on Alibaba has however not been changed. The company has become one of the most inspirational and compelling growth stories that have never happened in any sector or region. It is believed that China has a longtime growing retail opportunity and Alibaba is coming out as a dominant company in this regard. The recent concerns in the market are for a transitional period and exaggerated. It is advised for the investors to don’t stop investing in the company already. Because the investment will become long term and the company has a promising business model.

The shares that belong to Alibaba trade at 22 times the EPS estimate the calendar 2016 non-GAAP.

However, there are many people who believe that despite the early decline in the share growth for the company, it will become one of the biggest names globally. Its market in China has been growing and almost 80% of Chinese buy products online using this platform. The company is said to be on the way of making its mark globally now. It has entered the entertainment industry and is also monetizing the business to grow sustainably and rapidly towards globally acclaimed market.