Burry also believes Alibaba's return on invested capital is likely to keep declining #
Alibaba's American Depositary shares were trading in the red on Monday after Big Short Michael Burry said in a Sunday X post that he had completely offloaded his stake in Alibaba and has routed that capital towards JD.com after the Chinese e-commerce and AI giant disclosed plans to raise $10.2 billion via a stock offering to advance its AI projects.
Burry added that he had initially planned to move most of his Alibaba allocation back into the stock after a couple of months, but now that plan is cancelled until the stock price falls by at least 50%.
Alibaba priced the offering at HK$112.70 ($14.38) per share, a discount to Friday's Hong Kong closing price of HK$123 ($15.69). Burry indicated on X that Alibaba's valuation no longer justifies its risk profile, highlighting that 'issuing shares is now its [Alibaba's] new paradigm.'
In a separate Substack post yesterday, he wrote: 'I cannot bless share issuances,' he said, while predicting that the company's return on invested capital is likely to continue declining.
'BABA is making serious inroads in the commodity low-cost LLM bloodbath in the US. It is impressive as a disruptive force. and I believe this will continue,' Burry stated.
Alibaba said all proceeds from the stock sale will be used to develop and enhance its 'full stack' AI capabilities, including chips, infrastructure, and AI models.
However, the company reported a 75% decline in profit for the quarter ended in June, despite a 9% revenue growth from a year earlier. At the same time, capital expenditure soared 75% due to rapid AI infrastructure investments. Alibaba ADR shares are already down 18.5% year-to-date.
Burry first disclosed an Alibaba position in April, when the stock represented just over 6% of his portfolio, arguing that weakness in the shares offered a lucrative entry point. By late June, however, he had sold the stake entirely and rotated into JD.com, Adobe, and Fiserv. He has also maintained short positions in several AI stocks, including Nvidia, Micron, and Palantir Technologies.
Alibaba Stock Sale Reveals Robust Institutional Demand #
Alibaba priced 710 million newly issued ordinary shares under a Regulation S offshore placement, and the offering is expected to close on 26th August. Reuters reported that the offering was oversubscribed, with strong demand evident from sovereign wealth funds, which ultimately led Alibaba to ramp up the placement size.
Alibaba had also partly answered Burry's ROIC concerns. The company mentioned during its earnings call recently that it had committed close to half of its three-year AI capital expenditure plan, and that the expected payback period on that spending was narrowing to 2.5 years from 3 years amid surging demand for its cloud and model services.
Burry had also mentioned that he has built a 'large' position in JD.com, arguing that easing China delivery wars and recovering margins could transform the market narrative for both JD.com and Meituan. He previously named JD.com as one of his three best positions.
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