Recently, Alibaba disclosed in a regulatory filing that it has a 5.6% stake in the U.S. group buying company- Groupon, making it the fourth largest shareholder of Groupon.  While Alibaba described minority stake acquisition as a common practice for the company and stated that the stake in Groupon is to share ideas between U.S. and China markets, a holding greater than 5% makes Alibaba an active shareholder in Groupon. Alibaba already has similar positions in other U.S. companies such as online retailer Jet.com and ride hailing service Lyft. We believe that, after the failed debut of its boutique e-commerce site 11Main.com in the U.S., strategic tie ups are key for Alibaba to familiarize itself with the U.S. market. Only then can it contemplate an eventual expansion in the region. Moreover, Groupon’s recent bold measures at last seem to be paying off, as is evident in its Q4 2015 results. (Read Groupon Earnings Takeaways: Strong Performance In North America.) We believe a strategic stake in the O2O (online to offline) company, a space where Alibaba is developing an expertise, will help in its U.S. expansion in the long run.

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