Meme stock billionaire’s Alibaba wager risks clash with Beijing
Ryan Cohen enthralled a generation of stock market punters by placing counter-intuitive bets on household names from GameStop Corp. to Bed Bath & Beyond Inc. Now, the activist investor is taking on Chinese icon Alibaba Group Holding Ltd. and he may find himself at odds with the Communist Party in Beijing.
The billionaire entrepreneur, an idol of the meme-stock crowd who muscled his way onto the GameStop board, has taken a stake in Alibaba worth hundreds of millions of dollars.
He’s agitating for a ramp-up in share buybacks and predicts the internet giant valued north of $300 billion as of Tuesday will return to its pre-COVID19 days of heady double-digit growth.
That could put him in conflict with the priorities of Chinese President Xi Jinping. Since late 2020, Xi’s administration has made clear its distaste for the free-wheeling capitalism that tech giants like Alibaba embodied.
Through a series of abrupt regulatory edicts, the Party has wiped out growth at Alibaba and peers such as Tencent Holdings Ltd., and moved to exert greater control over everything from social media to companies themselves.
Only in recent months has that onslaught begun to recede, as Beijing prioritized the resuscitation of an economy devastated by three years of Covid Zero curbs and global inflation.
On Tuesday, Alibaba managed a 1 percent gain in Hong Kong a far cry from the explosive rallies that memestock watchers are accustomed to.
Cohen’s move triggered immediate debate about the realism of his goals and the practicality of trying to influence a $300 billion behemoth that like the rest of the giant internet sector has become increasingly subservient to its political masters.
“Futile,” said Hao Hong, an economist with Grow Investment, of Cohen’s endeavor. “It’s unlikely for Ryan to move the dial. It’s politically incorrect to report a huge profit against the backdrop of common prosperity.
Predictably, Cohen’s move drew its share of advocates and detractors on forums such as Stocktwits and Twitter.
Some advised selling the stock on news, while others wondered if Cohen would create a situation similar to Bed Bath and Beyond: the billionaire drew fire last year after individual punters got caught in a big selloff.
But a fair number also predicted another GameStop in the making. Cohen is pushing Alibaba to buy back more of its shares, in a rare case of activism targeting a prominent Chinese firm.
The entrepreneur contacted Alibaba’s board in August to make the case its shares were undervalued. That’s based on a view it can achieve double-digit sales growth and almost 20 percent growth in free cash flow over the next five years.
Such a performance would require a return to the scorching growth rates that China’s largest e-commerce company once routinely delivered — before it became a high-profile target of Beijing’s crackdown on technology giants.
The government in 2021 forced Alibaba and peers like Tencent to revamp business practices, wiping out top-line growth at a time Covid Zero curbs weighed on the economy. The company co-founded by billionaire Jack Ma posted a surprise loss in its latest quarter, as revenue again barely grew.
It’s also far from certain whether Cohen’s small stake would carry any weight with a company that, since the crackdown, has been careful to align itself with government “common prosperity initiatives” such as philanthropy.
Just this month, a government entity took so-called “golden shares in an Alibaba entity,” which in theory allows the government to nominate directors or sway important company decisions. That sort of vague threat raises questions about the efficacy of shareholder activism.