Cory Johnson reveals that there is a possibility that this is a case in a discussion on Bloomberg Markets with colleagues Pimm Fox and Olivia Sterns.
“If this becomes a strategic investment, if they start to partner with Alibaba, then […] Zulily is a little more interesting because maybe that’s a beachfront, to use your metaphor, for Alibaba,” Johnson tells Fox.
Fox was previously telling his colleagues that the Alibaba Group Holding Ltd (NYSE:BABA) investment in Zulily Inc (NASDAQ:ZU) is like a day in the beach for the Chinese electronic commerce giant. In light of the massive cash trove of the company, the $56.2 million investment they made for 9% of the company is a small investment, according to Fox.
Fox, however, also admitted in the discussion that on face value without looking at how massive Alibaba Group Holding Ltd (NYSE:BABA) is, $56 million is a very substantial investment. Nonetheless, Johnson and Sterns also note in the discussion that this is not a controlling stake in the company and that since it is less than 10% of all of Zulily Inc (NASDAQ:ZU)’s outstanding shares, the Chinese company does not need to file notice with the U.S. Securities and Exchange Commission if it sells the stake.
This means that the investment may either be Alibaba Group Holding Ltd (NYSE:BABA) just making better use of its money or it may be the start of a strategic partnership with Zulily Inc (NASDAQ:ZU) as both companies have similar business models, Johnson says.
On the question of whether Zulily is a good investment if it is just an investment for Alibaba, Johnson points out that the company is growing. This is prompted by Sterns telling Johnson that Zulily reported less than what was expected in their latest earnings call.
“It is a business that is growing terrifically from a sales standpoint. Last quarter, sales were up 29%. The quarter before that, [sales increased] 50%. If you expected a lot more, and Wall Street investors did, that was a disappointment – the fact that the business is growing more slowly. But it is a growing business,” Johnson says.
Alibaba Group Holding Ltd (NYSE:BABA) shareholders includes Dan Loeb’s Third Point which owned 10 million shares of the company by the end of last year. Also by the end of 2014, Lee Ainslie’s Maverick Capital owned about 3.4 million Zulily Inc (NASDAQ:ZU) shares.
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