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Why Alibaba bought nearly 33 million shares of Groupon

With news of Alibaba's stake in Groupon, the e-commerce stock jumped more than 16 percent in Tuesday premarket trading.

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(John Konstantaras / AP Images for Groupon)
Groupon booth is seen at the National Restaurant Association Tradeshow at McCormick Place, onMay 19, 2013 in Chicago. Groupon share prices jumped Tuesday after it became public that Alibaba had a 5.6 percent stake in the company.
  • By Staff Associated Press

| New York

Alibaba has bought nearly 33 million shares of online daily deal service Groupon.

Groupon Inc.'s stock jumped more than 16 percent in Tuesday premarket trading.

The purchase gives the Chinese e-commerce powerhouse about a 5.6 percent stake in Groupon. Alibaba disclosed the purchase in a SEC regulatory filing on Friday.

The news comes shortly after Groupon reported a fourth-quarter adjusted profit and revenue that beat analysts' expectations.

Why is Alibaba taking a major stake in Groupon? Forbes contributor Doug Young offers two possibilities. The first has to do with Alibaba selling a stake in a Chinese group buying web site Meituan-Dianping. It may want Groupon to expand into China. 

Thus Alibaba is suddenly left without a major partner in the group buying space. That contrasts sharply with its two major rivals, since Tencent looks positioned to become Meituan-Dianping’s leading partner. Online search leader Baidu is also pouring big money into its rival Nuomi group buying site. Thus a Groupon buy could help Alibaba to quickly re-enter the group buying space, even though geographically Groupon has little or no operations in China.

The other possibility could be a more strategic alliance that might see Alibaba increase its stake a bit more, perhaps to around 20%, after entering formal talks with Groupon. Alibaba has taken a similar approach with a number of other companies, most notably Weibo, often called the Twitter of China. Instances of similar tie-ups with foreign companies are far fewer, but such a pairing would provide Alibaba with fast access to expertise that could allow it to form a new China joint venture with Groupon.

Last month Alibaba Group Holding Ltd. reported better-than-expected third-quarter results as it benefits from a shift to mobile spending and a growth in users.

Shares of Chicago-based Groupon added 48 cents, or 16.6 percent, to $3.37 before the market open on Tuesday.

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