Published - January 17, 2023 @ 11:59 AM (EET)

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In a rare case of activism targeting a prominent Chinese firm, meme stock investor Ryan Cohen has built a stake in Alibaba Group Holding Ltd (NYSE:BABA) worth hundreds of millions of dollars.

According to the Wall Street Journal report, Mr. Cohen is privately pushing the Chinese e-commerce giant to accelerate and further boost its share-repurchase program by another $20 billion, to roughly $60 billion.

Mr. Cohen, known for helping ignite explosive rallies in GameStop Corp (NYSE:GME) and others, built the stake in the second half of last year, according to people familiar with the matter.

Though the stake is small compared to Alibaba's market capitalization of $300 billion, the entrepreneur has a broad following among retail and individual investors who often follow his lead.

In August, after championing well-known but languishing stocks like Bed Bath & Beyond (NASDAQ:BBBY), Mr. Cohen contacted Alibaba's board to make the case its shares were deeply undervalued.

The figures are based on his belief that it can achieve double-digit sales and nearly 20% free-cash-flow growth over the next five years, the people said, confirming a Wall Street Journal Report.

WHY IT MATTERS

Following the news, Hong Kong-listed shares of the Chinese e-commerce leader jumped 3%.  

While the stock later trimmed gains, it remains about 85% higher than its October slump on regulatory easing and China's reopening from Covid curbs.

Elsewhere, Alibaba's shares traded in the US have climbed about 67%, with its ADRs closing at $117.01 on Friday.  Though the stock is still down from a high of over $300 in late 2020, shares are steadily recovering and winning back investors.

Managing director Vey-Sern Ling at Union Bancaire Privee said Cohen's entry is "positive for the stock because it helps to raise confidence, especially among Western investors who have been skeptical of China."

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NOW WHAT

While it's unclear when Mr. Chohen took a specific interest in Alibaba, the entrepreneur noted his admiration for management's ability to grow earnings while assembling quality assets, the report added.  

The activist intends to have a collaborative, long-term relationship with the e-commerce giant, and his "presence on Alibaba's board might help raise public shareholders' governance over the company's strategic decisions," said Bloomberg Intelligence analyst Catherine Lim.