ryan cohen alibaba stake

Activist investor Ryan Cohen has built a position in Chinese e-commerce giant Alibaba (NYSE: BABA) and is reportedly pushing the company for more buybacks. Cohen is best known for his investments in meme stocks like GameStop and Bed Bath & Beyond.

Cohen earned his nickname as the meme stock king. He pushed for a strategy change at GameStop and became the chairman of the company. Under his watch, GameStop fired several top executives while also simultaneously hiring executives from tech giants like Amazon.

GameStop also ventured into new businesses like NFTs under Cohen. GameStop was once the flagbearer of the meme stock trade but has since tumbled in line with other meme stocks. However, amid the recent rise in stock markets, meme stocks have also spiked. There is a guide on trading in meme stocks.

Coming back to Cohen’s Alibaba stake, the Wall Street Journal reported that the activist investor is in talks with the company to increase the stock buyback.

When Alibaba released its earnings for the September quarter, it increased the size of its stock buybacks by $15 billion to $40 billion. The company had a $25 billion stock buyback in place out of which it already exhausted $16 billion. It also extended the buyback period to 2025.

Ryan Cohen Buys Alibaba Stake and Pushes for More Stock Buybacks

Companies usually buy back their shares when they find their stocks undervalued. We have a guide on how investors can buy cheap stocks like Alibaba.

Cohen reportedly wants Alibaba to increase the size of stock buybacks by another $20 billion to $60 billion. Notably, Alibaba stock fell to multi-year lows in 2022 and briefly fell below its IPO price.

The stock eventually bottomed at $58.01 and has since almost doubled. There has been a splendid rally in Chinese stocks like Alibaba over the last few months amid optimism over the reopening of the Chinese economy.

Also, the country has given ample signs of rapprochement with investors after the tech crackdown.

The China Banking and Insurance Regulatory Commission approved Ant Financial’s request to more than double its registered capital for the consumer unit. Alibaba holds a third of the stake in Ant Financial.

China Signals the Tech Clampdown in Over, Reaches Out to Investors

China also allowed downloads of Didi apps in the country after blocking them in 2021. The country previously pushed for the delisting of Didi from the US markets.

US Treasury Secretary Janet Yellen is set to meet Chinese finance minister Liu He in Zurich on Wednesday. Last year, China struck a deal with US regulators that would help prevent the forced delisting of Chinese companies from the US markets.

China has allowed US regulators to audit the books of US-listed Chinese companies failing which they would have been delisted. Alibaba was among the Chinese stocks that faced a possible delisting in the US.

While the price at which Cohen bought Alibaba is not yet known, he might already have made a significant gain on the investment given the recent rise in BABA stock.

For Cohen, Alibaba Won’t be the Next GameStop

For Cohen, pushing changes at Alibaba including an increase in buybacks might not be as easy as his stint with GameStop. Firstly, his RC Ventures is the biggest stockholder of GameStop and holds almost a 12% stake in the company.

GameStop was struggling as a business when Cohen built his stake and was able to push for board seats as well as his own chairman position.

The issues with Alibaba are a lot more nuanced. Firstly, Cohen does not hold a significant stake in Alibaba, unlike in GameStop. Secondly, Chinese companies are not used to the kind of shareholder activism as US companies do.

Notably, amid sagging stock prices, Big Tech companies like Meta Platforms and Alphabet have also faced shareholder ire. Altimeter Capital Chair Brad Gerstner called upon Meta Platforms to cut its workforce and lower the outlay towards metaverse business.

Weeks after the explosive letter, Meta Platforms announced that it is laying off 13% of its workforce. Alphabet investor TCI Fund Management also wrote a letter to the company calling upon the management to tighten the belts and also increase buybacks.

What does Cohen’s Alibaba Stake Means for the Stock?

While news of Cohen buying a stake in meme stocks invariably triggered a rally, Alibaba stock is almost flat today. The price action can be attributed to three reasons. Firstly, not many believe that Cohen can recreate his GameStop magic at Alibaba.

Secondly, Alibaba’s stock has already rebounded from its lows. Finally, many retail investors burnt their fingers following Cohen into Bed Bath & Beyond. While Cohen sold his holdings last year at a fat profit, many retail investors were left holding the shares of the retail company which flagged bankruptcy risks recently.

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