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Blue Ridge Capital Increases Position in Alibaba Group Holdings

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Blue Ridge Capital and Alibaba Group Holdings

Blue Ridge Capital increased its position in Alibaba Group Holdings (BABA) by over $50 million in the stock. The position represented 2.23% of the total portfolio in 4Q14, up from 1.58% in the third quarter.

Alibaba has a 2.60% exposure to the SPDR S&P China ETF. The ETF tracks the overall performance of 316 publicly traded companies in Asia. The competitor of BABA is eBay (EBAY), which is listed on the iShares Core S&P 500 ETF (IVV) with an exposure of 0.35% to the ETF. IVV tracks the overall performance of 500 publicly traded companies in the growth category. The hedge fund also started new positions in technology companies like Facebook (FB) and exited a position in Amazon (AMZN).

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Overview of Alibaba

The Alibaba Group is a Chinese e-commerce firm that operates in the online and mobile marketplace and connects retailers and wholesalers with prospective customers. The firm was started in 1999 to connect Chinese manufacturers with clients overseas and by the year 2012, Alibaba’s online portal had handled over $1.1 trillion in sales.

The initial public offering (or IPO) of this company had been in process for over a year and raised over $25 billion, thereby making it the largest IPO in stock market history. Taobao, which is the consumer-to-consumer portal of Alibaba, displays almost a billion products. The group’s websites accounted for 80% of the country’s online sales as of September 2014.

Alibaba partners with Haier

In a recent press statement, Haier Group and Alibaba Group announced that together they would launch a line of television sets, enabling users to not only watch their favorite shows online, but also to play games, shop, and browse the web.

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Alibaba faces pressure

After a historic IPO of $25 billion in the US equity markets last year, Alibaba’s share price has come under severe pressure in the last few months. The firm’s share price touched a high of $120 in November 2014. Currently, it’s trading at $82.97, a decline of over 28% in the last four months. Alibaba declared its 3Q15 results in January 2015. Even though revenue increased by over 40% to reach $4.22 billion, it missed Wall Street’s estimates of $4.45 billion.

Chinese authorities accused the company of selling counterfeit goods on its online platform, Taobao, which was negative for the firm’s image. According to a report by the Chinese State Administration of Industry and Commerce, “Illegal business exists on Alibaba Group’s trading platforms and for a long time the company has failed to pay adequate attention and failed to make measures to stop it. This not only is the biggest crisis of integrity faced by the company since its founding, but has also hurt other Internet companies that try to operate legally.”

While Alibaba’s share price has tanked in the last few months, Amazon saw its share price rise sharply by 23%.

$8 billion bond offering

November 2014 reports noted that Alibaba saw a high demand for its $8 billion debt offering. The company plans to use the net proceeds primarily to refinance its existing credit facilities.

The next article will discuss Blue Ridge Capital’s position in Monsanto.

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