Alibaba (BABA) Builds $153 Million Stake in zulily (ZU)

May 10, 2015 10:48 PM EDT
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Late Friday, Alibaba (NYSE: BABA) disclosed in a Form 4 filing with the SEC that is has acquired just over 4.8 million shares of zulily (NASDAQ: ZU) from 05/06/15-05/08/2015. The purchases were made at prices from $10.75-$12.26 per share and followed the online retailer's recent disappointing first quarter results and lower guidance.

Alibaba now owns 11,500,000 shares of zulily through an investment vehicle, valued at $153 million. However, the prior stake was not previously revealed. zulily lists Alibaba as a direct competitor.

A person familiar with the matter told the Wall Street Journal that Alibaba is not interested in acquiring the entire company. Meanwhile, zulily's CEO said they have lot of respect for Alibaba and welcomes them as a shareholder.

Coming public in November of 2013 at $22 per share and opening its first day of trading at $39 per share, the stock has been a dismal performer and closed Friday at $13.30 per share, or 39% below its IPO pricing and 66% below its IPO open.

Action in the stock over the past few days has been telling ahead of the Alibaba stake disclosure. After opening 19% lower on May 6th following the results and weak guidance, shares rallied into the close that day. Shares continued higher the next two sessions, including Friday's nearly 13% gain.

While Alibaba clearly sees value in the stock, analysts have recently cited concerns about deteriorating fundamentals, with growth decelerated from 52% in Q4 to 29% in Q1, and deteriorating metrics, with net customer additions just 100,000 in Q1 of this year versus 500,000 in the same quarter last year.

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