Alibaba Group Holding Ltd (NYSE:BABA) has been buying stakes in several US based companies, mostly retail businesses, with the latest opening of 5% in Groupon. Alibaba has stated that it is a common practice, to open minority positions in different businesses, for the company. It also clarified that minority stakes are expected to help the company learn about the American markets. Previously, Alibaba had tried to open its own online boutique service in the US, 11Main.com. Unfortunately, the business failed to attract customers.
Groupon has been making progress, after some bold moves from the management. The business was able to report a better than expected 4Q2015. Alibaba could possibly be trying to learn a few tricks from its minority companies, in order to expand its own business in the US, successfully. In its FY2015 report, Alibaba reported a 39.55% return on equity. The company had $9.4 billion in income and $28.7 billion in shareholder equity.
Alibaba has had a fluctuating ROE, since its inception. During the last 10-years, BABA’s ROE fluctuated between 13.4% and 157.4%. However, this year’s figures were up from the preceding year. The industry average for the same period was 20.3%, with names like Amazon reporting just 2.88%. This reflects that Alibaba is doing much better than its peers, while staying in its current market, China. Added to this, the company is also expected to expand operations in India and Russia, where e-commerce is yet to take a strong hold.
At the moment, Alibaba is not expected to initiate and direct expansion plans for the US market. It is expected that the company will continue opening minority positions in different retail companies, in a bid to learn about the market. However, the US market would definitely be a part of the company’s long-term growth plans.
Alibaba Group Holding Ltd (NYSE:BABA) lost 0.95% of its stock value during the February 25 trading session, after having a trade volume of 14.69 million, to close at $66.59.
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