Jack Ma has been eyeing America carefully since the initial Alibaba listing on the New York Stock exchange raked in US$ 25 billion in September last. At the time, Forbes Magazine expected him to move into consumer banking, while perhaps dabbling in soccer or maybe making movies as a sideline. However his latest gambit on the American bourse last Friday came as something different.
Zulily – the target of Jack Ma’s interest – is an online flash store featuring a rapidly cycling range of bargains. It runs a tight affiliate, drop-ship operation which is great for cash flow as it does not own a single warehouse. Notwithstanding an improvement over 2014 numbers in the early part of 2015, the company is still experiencing ‘risks and uncertainties’ causing it to consider a stock repurchase.
Alibaba Timing Impeccable
Alibaba timing was impeccable when it entered the market last Wednesday, as Zulily shares hit an all-time low of US$9.09 down from US$73.50 in February 2014. The China ecommerce giant played its hand coolly over the three-day period, and picked up stock at rock bottom prices which look great for future equity. By the time the binge was over, the Asian giant held 11.5 million Zulily shares compared to the approximately 7 million it held before it started.
According to <Re/Code> quoting the Wall Street Journal, Alibaba leaked a tip that it is not interested in an outright purchase of the entire Zulily stock. That said, its latest acquisition does improve strategic access to brands and markets dominated by Amazon.
Another Spin on Jack Ma’s Decision
There is also the intriguing possibility that Jack Ma is hedging bets against Cyberspace Administration of China hogtying incoming ecommerce sales in the event it decides the vendors are offering ‘undesirable products’. If this happens, then the wily executive may have made an even better investment than it appears to be at face value.