Alibaba's Share Offering Validates Michael Burry's Concerns
Michael Burry of Scion Asset Management recently shifted his investment from Alibaba (BABA) to JD.com due to concerns over share dilution. Shortly after, Alibaba announced a $10.2 billion Hong Kong share offering at an 8.4% discount, causing its stock price to drop by as much as 10%. The offering was oversubscribed with strong demand from institutional investors. Despite the market reaction, Alibaba's management argued on their earnings call that AI investments are becoming more efficient and profitable over time. They stated that payback periods for these projects have shortened, suggesting a potential upside to continued capital spending in artificial intelligence. This highlights an ongoing debate between Burry’s dilution concerns and Alibaba’s strategic vision. The stock's sharp decline underscores investor sensitivity to share issuance as a value destroyer relative to AI growth expectations.
