Alibaba In Two Big Deals This Morning, Solidifying The Future For Shareholders

Alibaba is making some big moves this morning in order to solidify its footing in the offline world and position itself to take advantage of the ongoing/oncoming blending between the online and offline worlds.


First, the company announced that they will invest about $1 billion to increase its stake in Lazada Group, a leading e-commerce player in Southeast Asia. This new investment will increase Alibaba's ownership in Lazada from the current 51% to 83%. The new valuation of Lazada is set at $3.15 billion. Post this new investment, Alibaba will have funded Lazada with over $2 billion in the last year and a half or so.


Second, Alibaba chatter is that they are close to a deal to acquire the software unit of Chinese telecommunications gear maker ZTE Corporation. The purchase price for ZTEsoft Technology is said to be in the 2 to 3 billion yen range. If the deal is consummated, it will allow Alibaba to have a captive software unit to help in its cloud expansion plans going forward.


However, since we are in a risk-off mode and have been since the "fat-fingered event" three weeks or so ago, investors are too busy selling Alibaba shares, no matter the brilliant strategic moves Alibaba (or for that matter a lot of other technology companies) are making right now to solidify the future.


The head-for-the-hills crowd is in control at the moment.


You have Janet Yellen, boss of the Federal Reserve, say the Fed is not targeting asset prices but the other Fed heads, including the vice-chair, specifically doing just that.

You have a political quagmire in Washington.


The IMF just lowered their GDP forecast for our economy for 2017 and 2018 down to 2.1% for each year citing the inability of President Trump to make any progress on its infrastructure bill and tax cuts among other reasons.


Finally, you have a delicate geopolitical situation pretty much all over the globe be it Afghanistan, the Middle East, North Korea or just about any other place in the world.


The always-bearish-never-wrong are gleefully repeating their "I told you so's."


The kindly uncles are talking about how pleased they are to see the markets decline so as to allow them to "put their cash to work."  They have been waiting to put the cash to work forever and more than likely will keep saying the same thing over and over again and waiting for further declines in the markets till the opportunity to invest is long past.


Finally, the magical position crowd is, of course, cawing about how short they were going into this mini-meltdown. Thus the moniker "magical positions crowd" (long everything going up and short everything going down all after the fact, of course).


As an aside, a lot of investors are warming up to my theory on so-called fat finger trades being the exclusive domain of Wall Street. If one thinks about it, Wall Street firms have the most to gain after all. Many are saying that was the trigger point of the weakness in techland.


However, once out of this recent current risk-off phase, shares of Alibaba and the rest of the companies in techland could be poised literally for take-off.


(long baba, long and short options)

Original Link
https://www.forbes.com/sites/jaysomaney/2017/06/28/alibaba-in-two-big-offline-deals-solidifying-the-futures-for-shareholders/#5817dc5646f1