Michael Burry Dumps Alibaba Before $10.2B Hong Kong Offering, Calls for 50% Price Drop to Re-Enter

Burry Exits Alibaba Entirely Ahead of Record Hong Kong Share Sale

Michael Burry, the investor famously portrayed in The Big Short, liquidated his entire stake in Alibaba Group Holding Ltd. (BABA) and reallocated the capital into Chinese e-commerce rival JD.com Inc. (JD) — all before Alibaba completed a landmark $10.2 billion Hong Kong share offering over the weekend. In a post on X, Burry made his view on the deal abundantly clear, stating he cannot endorse share issuances of this nature and adding that Alibaba's stock would need to fall by roughly 50% before he would consider re-entering the position, according to Bloomberg.

A Steep Decline and a Record-Breaking Deal

Burry's exit coincided with significant turbulence in Alibaba's American depositary receipts. Shares fell 8.6% on the Friday before the offering was announced — the sharpest single-session decline in over a year — a notable contrast to broader U.S.-listed Chinese stocks, which largely posted gains that same day. To get the deal across the finish line, underwriters priced the offering at an 8.4% discount to Alibaba's Hong Kong closing price that Friday.

Despite the rocky setup, the transaction itself broke records. The offering — priced at HK$112.70 per share for 710 million shares — raised HK$80 billion, equivalent to approximately $10.2 billion U.S. dollars, making it the largest follow-on equity offering in Hong Kong's history. Institutional demand was strong, with orders coming in at roughly three times the number of shares available.

Pre-Deal Selling Draws Scrutiny

The steep drop in Alibaba's ADRs ahead of the announcement has raised eyebrows in Hong Kong's financial community, particularly given heightened sensitivity around so-called wall-crossing arrangements. These agreements require institutional investors who receive confidential advance notice of a planned share sale to refrain from trading on that information.

The issue is especially timely given that Sengantii Capital Management and its founder, Simon Sadler, are currently on trial over allegations that they traded shares of fashion retailer Esprit Holdings Ltd. using confidential information tied to a 2017 share placement. Both parties have pleaded not guilty, but the case has drawn fresh attention to pre-deal trading conduct.

For context, Bloomberg noted that similar pre-announcement declines are far less common in U.S. markets. Alphabet Inc. (GOOGL), for instance, slipped just 2.5% in the session before announcing $80 billion in equity offerings in June, while Intel Corp. (INTC) actually gained ground ahead of its own secondary share sale disclosure in August.

Alibaba's AI Ambitions Drive the Capital Raise

Alibaba has signaled that all net proceeds from the offering will flow directly into AI infrastructure — a strategic priority the company has backed with an ambitious multi-year commitment. The tech giant has pledged to invest more than 380 billion yuan (approximately $56.5 billion) over three years in chips, data centers, and large-language model development.

That bet appears to be gaining traction operationally. Alibaba's cloud division reported revenue of 41.63 billion yuan in its most recent quarter, a 38% increase year-over-year. More striking, AI-related revenue within that segment has posted triple-digit year-over-year growth for 11 consecutive quarters — a streak that analysts note reflects the accelerating enterprise adoption of AI tools across China.

Asset Sales Fund the Expansion

To help finance its AI pivot, Alibaba has been methodically shedding non-core holdings. The company reached a deal to sell its gaming unit, Lingxi Games, to Trustar Capital for at least $1.5 billion. Earlier divestitures in late 2024 included stakes in hypermarket chain Sun Art and department-store operator Intime, which together generated approximately $2.6 billion.

What to Watch

The combination of Burry's high-profile exit, the sharp pre-deal price drop, and the regulatory spotlight on wall-crossing conduct creates a complex backdrop for Alibaba investors to navigate. Meanwhile, the underlying AI growth story remains intact by the numbers, with the company's cloud and AI segments continuing to post substantial gains. Whether the market ultimately rewards Alibaba's massive capital deployment in AI infrastructure — or views the dilutive share issuance as a headwind — is likely to be a key debate in the months ahead.