Alibaba buys 9 percent stake in Zulily

Monday, 11 May 2015
Alibaba Group Holding has acquired a stake of more than 9 percent in US-based e-tailer Zulily. The Chinese apparel conglomerate has paid over 150 million dollars for the 9 percent of the American retailer´s equity.
The acquisition was disclosed in a securities filing that showed Alibaba spent millions  of dollars buying Zulily stock as the US company’s shares plunged in recent days. As a matter of fact, earlier this week, the company cut its sales forecast for 2015.

 

Zulily went public in November 2013 at 22 dollars a share, with the stock trading up to 70 dollars apiece early last year, as the company reported steady sales growth – its sales hit the 1 billion dollars milestone in 2014 -. Nevertheless, the stock has lost near a 43 percent in the year to date.

Zulily’s shares have plunged this year due to disappointing quarterly reports that showed sharply decelerating sales growth and difficulty holding on to customers, many of whom aren’t returning to Zulily’s website after making a first purchase.

However, Alibaba has shown its confidence in the company, saying that Zulily had “a compelling vision for the future”.

Alibaba sees investment in Zulily as another exploration of the US market

Through an investment subsidiary, Alibaba bought 4.8 million Zulily Class A shares, for about 56 million dollars, according to securities documents filed late Friday.

That brings its total ownership in Zulily, a moms-oriented online retailer, to some 11.5 million shares — close to one sixth of the company’s Class A stock, worth about 156 million dollars, as highlight Seattle press. Those Class A shares, however, have just a tenth of the voting power of the restricted Class B stock, most of which is controlled by the company’s founders.

It is worthy a note that Alibaba’s earlier stake of less than 5 percent in Zulily had not been previously disclosed.

Now, Alibaba’s investment amounts to about 9.3 percent of Zulily’s total shares, which as of market close on Friday had a market capitalisation of 1.64 billion dollars.

Alibaba wasn’t looking to acquire Zulily outright, a source said, as published ‘The Australian’. Zulily CEO Darrell Cavens said his company had a lot of respect for Alibaba and welcomed it as a shareholder.

As previously hinted by the Chinese apparel holding, the US market is one of interest for future growth. “The key issue is whether we are going to have something in the US market that will really target US consumers,” Alibaba executive vice-chairman Joe Tsai said in an interview with ‘The Wall Street Journal’ in November. “We think in the long run that’s an interesting market to us. But today, our focus is very much on cross-border activities,” he concluded.

In this sense, it is worth remembering that Alibaba has invested in different apparel and e-commerce American names, injecting last year 15 million dollars in New York-based luxury e-commerce site 1stdibs and launched its own US shopping website, 11 Main. In 2013, it led a 206 million dollars round of investment in ShopRunner.

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