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Alibaba snaps up 5.6% stake in Groupon, shares surge

Global eCommerce marketplace Groupon shares surge after Chinese Alibaba snaps up 5.6% stake in its rival
Alibaba snaps up 5.6% stake in Groupon, shares surge
Alibaba swoops on Groupon stake

Global eCommerce marketplace Groupon (NASDAQ:GRPN) shares surged 46% on Tuesday after Chinese Alibaba (NYSE:BABA) snapped up 33 million shares in its rival.

Alibaba now has a 5.6% stake in Groupon, according to a regulatory filing the Chinese player filed late on Friday.

Chicago-based Groupon currently operates in 28 countries, down from a peak 45. Even so, that's a boon for Alibaba which wants a wider international presence.

Alibaba is also interested in  Groupon's group buying power. The Chinese firm his hungry to put right its deficiencies in this area, and even a minority stake of 20% to 30% could lead to a strategic alliance or joint venture with Groupon that saves Alibaba considerable development time. So this may not be the last Alibaba buys of Groupon.

News of the share buy comes after Groupon last week reported better than expected results for its fourth quarter of fiscal 2015 as well as an upbeat outlook, which caused its stock to soar 29%.

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

The transaction also comes after news last Friday that litigants Pomerantz LLP had reached an agreement in principle to resolve the Illinois class action with Groupon, by calling for a US$45mln settlement.  The settlement is contingent upon court approval.

Groupon shares hit a session high of US$4.23, rising by 46% on since the Friday close. US bourses were closed on Monday for a public holiday. Meanwhile, Alibaba shares were up 8.9% in New York at US$66.33.

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