Michael Burry, a prominent investor, has decided against reinvesting in Alibaba after the company announced a $10 billion share sale to fund AI ambitions. He now states Alibaba's stock would need to fall 50% for him to reconsider, indicating a significant shift in his investment thesis due to concerns about dilution and return on invested capital.
Michael Burry, known for 'The Big Short,' has publicly stated he will not move his position back into Alibaba (BABA) after the company announced a $10 billion share sale to fund AI investments. This decision marks a significant change from his previous plan to re-enter BABA, citing concerns about dilution and a 'new paradigm' for the company's return on invested capital. This is a negative signal for Alibaba, as a high-profile investor is expressing a lack of confidence and setting a much lower price target for re-entry. Conversely, it could be seen as a positive for JD.com (JD), where Burry has consolidated his position. The short-term implication for BABA is likely continued downward pressure, while the long-term impact depends on how effectively Alibaba uses the raised capital for AI and whether it can improve its ROIC. For traders, this highlights a potential opportunity in JD as a relative play against BABA, or a short opportunity in BABA if Burry's sentiment gains traction.