Alibaba Group Holding Limited

New York Stock Exchange
Back to all articles
Bearish -65

Michael Burry Says He Sold Alibaba, Calling It Pricey Before $10.2 ...

AI-generated analysis

📉 Michael Burry sold his entire stake in Alibaba Group Holding Limited (NYSE:BABA), calling the shares overvalued.

💸 Burry cited a recent $10.2 billion share placement by Alibaba as the primary reason for his exit, citing objection to share dilution.

📉 Burry expects Alibaba's return on invested capital to decline due to the new financing structure and AI-focused capital raises.

🔄 Burry previously held over 6% of his portfolio in BABA but reversed direction in late June to invest in rival JD.com.

📊 Hedge fund ownership of BABA decreased marginally from 102 funds in Q1 to 97 funds in Q2, reflecting shifting institutional sentiment.

⚠️ Burry stated the stock price would need to fall by half before he becomes interested in buying Alibaba again.

🤖 The $80 billion share offering was specifically announced to fund Alibaba's 'full stack' artificial intelligence capabilities.

📉 Analysts warn that new share issuance can pressure per-share economics if the raised capital fails to generate adequate returns.

🔄 Burry described the share issuance strategy as a 'new paradigm' for the company, signaling a fundamental shift in his view.

Risk Factors
  • Michael Burry sold his entire stake in Alibaba Group Holding Limited (NYSE:BABA), stating the shares are overvalued.
  • Burry objected to a recent $10.2 billion share placement, citing dilution as a key reason for abandoning his plan to reinvest.
  • The investor expects Alibaba's return on invested capital to continue declining due to the new financing structure.
  • Burry stated that the stock price would need to fall by half before he would consider buying again.
  • Hedge fund holdings in BABA decreased marginally from 102 funds in Q1 to 97 funds in Q2, indicating reduced institutional interest.
Full Analysis
Michael Burry, the investor known for his subprime mortgage bets, announced on August 23 that he has completely sold his stake in Alibaba Group Holding Limited (NYSE:BABA). In a Substack article, Burry characterized BABA shares as overvalued and stated that the stock price would need to fall by half before he would consider reinvesting. He originally intended to rotate his capital into Alibaba within a month or two but abandoned this plan following recent corporate actions. Burry's decision to exit was directly triggered by Alibaba's completion of an approximately HK$80 billion, or $10.2 billion, share placement designed to fund its artificial intelligence goals. Burry explicitly stated he cannot bless share issuances and objected to the dilution caused by the financing. He further expressed concern that this capital raise signals a 'new paradigm' for the company, expecting Alibaba's return on invested capital to continue declining as a result of these financing activities. Previously, Burry had acquired a stake in April comprising just over 6% of his portfolio but reversed direction in late June, selling the entire holding to invest in JD.com, Inc. (NASDAQ:JD), Alibaba's main domestic rival. Institutional data reflects this shift, showing hedge fund holdings for BABA decreasing marginally from 102 funds in the first quarter to 97 in the second quarter. Analysts note that while share offerings for AI infrastructure are common, the dilution pressure on per-share economics remains a significant concern for existing shareholders. The article concludes by contrasting Burry's skepticism with the broader investment case for BABA versus JD.com. While JD.com offers a low valuation and potential earnings recovery, BABA faces specific risks related to its capital structure changes. The narrative suggests that investors should focus on BABA's specific fundamentals regarding its AI buildout costs and dilution rather than viewing Burry's position as a definitive long-term outlook indicator.