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Why Alibaba bought nearly 33 million shares of Groupon

With news of Alibaba's stake in Groupon, the e-commerce stock jumped more than 16 percent in Tuesday premarket trading.

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    Groupon booth is seen at the National Restaurant Association Tradeshow at McCormick Place, onMay 19, 2013 in Chicago. Groupon share prices jumped Tuesday after it became public that Alibaba had a 5.6 percent stake in the company.
    (John Konstantaras / AP Images for Groupon)
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Alibaba has bought nearly 33 million shares of online daily deal service Groupon.

Groupon Inc.'s stock jumped more than 16 percent in Tuesday premarket trading.

The purchase gives the Chinese e-commerce powerhouse about a 5.6 percent stake in Groupon. Alibaba disclosed the purchase in a SEC regulatory filing on Friday.

The news comes shortly after Groupon reported a fourth-quarter adjusted profit and revenue that beat analysts' expectations.

Why is Alibaba taking a major stake in Groupon? Forbes contributor Doug Young offers two possibilities. The first has to do with Alibaba selling a stake in a Chinese group buying web site Meituan-Dianping. It may want Groupon to expand into China. 

Thus Alibaba is suddenly left without a major partner in the group buying space. That contrasts sharply with its two major rivals, since Tencent looks positioned to become Meituan-Dianping’s leading partner. Online search leader Baidu is also pouring big money into its rival Nuomi group buying site. Thus a Groupon buy could help Alibaba to quickly re-enter the group buying space, even though geographically Groupon has little or no operations in China.

The other possibility could be a more strategic alliance that might see Alibaba increase its stake a bit more, perhaps to around 20%, after entering formal talks with Groupon. Alibaba has taken a similar approach with a number of other companies, most notably Weibo, often called the Twitter of China. Instances of similar tie-ups with foreign companies are far fewer, but such a pairing would provide Alibaba with fast access to expertise that could allow it to form a new China joint venture with Groupon.

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

Shares of Chicago-based Groupon added 48 cents, or 16.6 percent, to $3.37 before the market open on Tuesday.

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