China buys 'golden shares' in two Alibaba units

Investor Ryan Cohen increases his stake in Alibaba and pushes for more share buybacks

Jan 16 (Reuters) – Billionaire investor Ryan Cohen has bought a stake in China’s Alibaba Group (9988.HK) worth hundreds of millions of dollars and is pushing the e-commerce giant to increase and accelerate buybacks of actions, according to people familiar with the matter. he said he Monday.

Cohen, who built his fortune by co-founding online pet retailer Chewy Inc (CHWY.N) and consolidated it with investments in video game retailer GameStop (GME.N) and Apple Inc (AAPL.O), approached Alibaba. last August to voice concerns, the people said.

In his communications, Cohen told Alibaba that he thought the company could achieve double-digit sales growth and nearly 20% growth in free cash flow over the next five years, according to the sources.

Cohen felt the company’s shares were undervalued at the time, according to the people, who declined to be named because the investment is private.

Alibaba in November raised the size of its share buyback program to $40 billion, increasing it by $15 billion, and said it would extend the program’s time frame to the end of March 2025.

Cohen has told Alibaba executives more can be done, suggesting the buyback program could be raised to $60 billion, people familiar with his communications said.

Alibaba’s ADRs, traded in the United States, closed at $117.01 on Friday, up 30% from early August and up 27% this year. However, the price is still far from its high of more than $300 per share reached during the COVID-19 pandemic.

The people said Cohen is looking forward to a long-term collaborative relationship with Alibaba and has praised the management’s capabilities.

Alibaba representatives were not immediately available for comment.

The company’s shares began a rolling slide in late October 2020, just as authorities in Beijing began cracking down on the tech sector. The company lost about a third of its value in November 2022, though shares have rallied in recent weeks amid signs the Chinese government will ease its pressure on internet companies.

Over the same period, Alibaba has steadily escalated its share buyback program. It first announced the scheme in late 2020, pledging to buy back $10 billion over a two-year period.

The Wall Street Journal first reported on Cohen’s involvement in Alibaba.

The Chinese e-commerce company could find a model for how Apple has helped its own share price by buying back shares, the people said. Cohen owns a stake in Apple valued at about $800 million, they said.

In addition to reducing the supply of available shares, supporting their prices, buybacks, often recommended by activist investors, can send a signal to the market that executives are confident how high their company’s shares could rise.

The 37-year-old Canadian-born Cohen has an estimated net worth of $2.5 billion. He made a splash in the investment world two years ago when he joined GameStop’s board of directors, sparking a stock price frenzy that turned the video retailer into a so-called investor-backed ‘meme stock’ retailers.

He eventually forced GameStop’s management out of management and set about turning it into an e-commerce company.

Shares of GameStop, which split into shares in 2022, are up 19% this year, though they’re down 25% in the past 52 weeks.

Last year, Cohen briefly invested in retailer Bed Bath & Beyond Inc (BBBY.O) and lobbied for the company to consider selling its BuyBuy Baby chain or possibly the entire company. He settled in the company and three new directors joined the board.

Much of Cohen’s net worth is tied to a handful of stocks, including Wells Fargo & Co (WFC.N), Citigroup Inc (CN) and Netflix Inc (NFLX.O). He also has real estate and cash.

Cohen has previously said that he wants to find more undervalued companies to invest in and identify those that can be better managed and push them to adopt change.

Svea Herbst-Bayliss in New York; Additional reporting by Miyoung Kim in Beijing and Aishwarya Nair in Bengaluru; Edited by Leslie Adler and Kenneth Maxwell

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