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Groupon’s app is shown on an iPhone. Alibaba acquired the shares in December. Photo: Bloomberg

China’s Alibaba buys 5.6 per cent stake in Groupon to rank as No. 4 shareholder in online deals site

Groupon shares still down 61 per cent over last 12 months despite sudden 29 per cent surge yesterday

Alibaba Group Holding has snapped up 33 million shares of Groupon, making it the fourth-largest shareholder in the online deals website that has lost 86 per cent of its value since going public more than four years ago.

The Chinese e-commerce giant owned 5.6 per cent of Chicago- based Groupon as of December 31, according to a regulatory filing on Friday.

Alibaba has also accumulated stakes in online retailer Jet.com, augmented-reality provider Magic Leap and car-booking company Lyft. The purchases are part of the Chinese company’s strategy to learn more about the US market as it expands internationally, said Gil Luria, an analyst at Wedbush Securities Inc.

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“They don’t want to have their own operations, so they are investing in other companies to help them learn and pave the way for more robust activity down the road,” Luria said.

A spokesman for Hangzhou, Zhejiang-based Alibaba declined to immediately comment on the filing. Bill Roberts, a Groupon spokesman, said the company hadn’t been aware of Alibaba’s stake until Friday’s filing.

“Alibaba has a reputation as a long-term holder, and we’re pleased that they take the same view of Groupon’s opportunity and execution as we do,” Roberts said.

Alibaba’s stake was reported hours after Groupon had its best day with investors in more than four years. Groupon surged 29 per cent to US$2.89 at the close Friday in New York, the biggest single-day increase since November 4, 2011 - the day after its initial public offering at US$20 a share.

Groupon on Thursday reported fourth-quarter results that beat analysts’ estimates, driven by purchases in North America. The company said profit excluding some costs was 4 cents a share, compared with the average analyst estimate for a break-even quarter.

Having struggled since its IPO to spur growth and profits, Groupon replaced CEO Eric Lefkofsky in November. Since Williams took over, he increased the marketing budget in an effort to revive and reinvent the former internet darling. Williams said his efforts are starting to bear fruit.

“If we do our jobs really well, we’ll beat our plan,” CEO Rich Williams said in an interview.

“The reality is we have a lot of work to do.”

Even with Friday’s gains, the shares are down 61 per cent over the past 12 months. On Bloomberg Television Friday, Williams said his company’s stock was undervalued, but that it wasn’t looking to make any deals.

“Our focus as a team just isn’t on things like acquisitions, or being acquired,” Williams said.

“Our focus is on building a great business.”

READ MORE: Alibaba buys South China Morning Post Group’s media business

Groupon said adjusted earnings before interest, taxes, depreciation and amortisation would be US$80 million to US$130 million in 2016, compared with analysts’ projection for US$105.1 million.

The company is continuing its search for a permanent chief financial officer and is interviewing internal and external candidates, Williams said.

Groupon has exited 17 countries and now operates in 28 as it continues to streamline its operations internationally.

“We are feeling pretty good about our footprint,” Williams said.

“But we are going to continue to evaluate it opportunistically.

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