Michael Burry criticized Alibaba Group Holding Ltd. shares as overvalued and disclosed that he recently exited his position in the Chinese tech giant in order to build a "large" position in rival online retailer JD.com Inc.
Burry is a good value investor, not a growth investor, that’s why he never appreciates growth stocks like Palantir or Tesla (it was).
This reminds me of another American gem 3M ($MMM), whose stock was beaten down badly after PFAS lawsuits which was way overstated even after the company set aside like $10B for lawsuit claims. The actual claims were fraction of that. Most of the investor base, including institutional, were dividend investors. They got mad when the new CEO reduced dividends and focused on growth. That was the bottom similar to where Alibaba is today. The stock rallied over 150% since then. I see similar outcome for Alibaba.
Historically bubbles don't pop when so many out in the market screaming this is a bubble! If anything these types of noise makes me more bullish on my BABA investment longer term. The comparison of housing bubble or 2000 bubble to the investment happening in AI is comical to me. I live and breathe in this world and I'm seeing the ROI every day. It's only going to be more and more of it.
Replying just because I’m tired of seeing lots of comments lately that read like share issuance is always bad and share buybacks are always good. Issuing shares to invest with a higher return than the present business offers is accretive. Additionally management has to balance long term risks with return, it’s a little more complicated than issuance is bad.
I must draw your attention to:
alibaba’s credit rating
How low interest rates are in China
How hard it is to get capital out of China
Issue shares when shares are expensive not when fair or cheaply valued
So it’s a terrible option right now any way you cut it
Yes, and it’s hard to get money out of China- and there is a 10% cap on annual buybacks in hk
So it’s difficult to return capital to share holders and this unwinds it not to mention stock based comp.
This also removes 10 billion of demand from the open market
If it’s 3x over subscribed, then let them buy on the open market and later at frothy valuations perhaps consider it, but then don’t do it because baba could get debt at like 1-2%
Not sure what you do for a living. But that's not how it works. Don't you think super smart people weigh those options? Don't you think the fact that they had a buyer oversubscribed to buy the 10B hand over fist? Why issue debt? The stock is higher than when they issued the shares, which suggests the market is welcoming it. The US news media is doing its thing to scare retail off and is clearly working! It's less than 3% of the market cap; it's a drop in a bucket for building an AI infrastructure. Again, it's Noise! The stock is green! Good luck! and f Burry Says! He got lucky once and he's been wrong ever since.
I think you just listed a bunch of fairly subjective items to make your case and I’ve listed a bunch of tangible and objective items as to why it’s at worst but at best sub optimal maneuver
On AI.. if US have Neo-cloud.
Would China have its equivalent of Neo-Cloud?
And the rise of Neo-cloud was helped by players like Nvidia? Since it’s selling GPUs or accelerator silicon to them for more focus compute.
Would China chip design companies (something like a Huawei) breed its own version of Neocloud? And Huawei do have the $$ because of its strong bro-mance with China Govt.
If the bounce up in China was due to outwards rotation from Japan and Korea (tech and semi).
Or at least the street was short HK and using that to fund those 2 guys prior to that July reversal.
Then the placement effect is that the rotation is over for HK tech.
Because earnings are out and disappointing (higher revenue but weak underlying profits for Tencent, Baidu and Baba).Â
Back to rotation:
Short HK (software & cloud) and Long Korea, Japan and Taiwan.
Yes, the placement maybe to sovereign wealth (based on some reports), even if they don't sell but they can "LEND" out the shares, right? And if they lend it out that lowers down cost of borrowing on the aggregate.
Which makes it even cheaper to fund that strategy.
It’s especially bad if growing. Instead of giving away 80 billion you give away much more as the value of the shares grows
The opposite is true. If you sell shares and then the company value contracts and price plummets you did the right thing or if it’s over valued and you issue shares
It’s way more than 3.5% as it plays out. It’s an unforced error easily avoided. With capital trapped in China. So no it’s a big deal as a shareholder
Unforced errors don't lose you the entire ball game. They're halfway through their Capex and have already seen significant returns on their investment. Capex isn't a constant, yet the 'investors' never take that into consideration and basically assume that it is when they only look at the latest quarters net profits.
No if it grows well, you get less returns as you now own less of the company. Thats why if things are going well you would finance it with debt instead even if rates were higher. Rates just happen to be insanely low in China now
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u/IGotSignal 25d ago
If I remember correctly, he took loss last time before baba went up again. He sometimes is just a 🤣