Alibaba shares seen lower on Wanda film stake purchase

on Feb 5, 2018

Alibaba shares are seen opening lower at the US open Monday, following news the China-based eCommerce and tech business has agreed to become the second-largest shareholder in Wanda Film Holding. The deal comes as Wanda Group sells off some of its business to pay down its debt pile.

Alibaba shares closed lower on Friday in the US at $187.31. Pre-market activity places the Alibaba stock down over 2% at Monday’s US market open.

Alibaba to work with Wanda

Wanda announced Monday it was selling 12.77% of Wanda Film Holdings to Alibaba and China’s state-backed Cultural Investment Holdings.

Alibaba will take the bigger stake of the two – and gain 7.66% of the business for an CNY4.68 billion investment. That will make Alibaba the second largest shareholder in Wanda Film Holdings, behind Wanda who will retain an 48.08% stake.

CIH, meanwhile, will buy a 5.11% stake of the Wanda business, for CNY3.12 billion.

Both Alibaba and Cultural Investment Holdings have agreed to pay 51.96 yuan per share for their Wanda Film stakes.

“The main purpose of the equity transfer of Wanda Film Holding is to bring in shareholders with strategic value,” Wanda said.

Wanda anticipates gaining access to some of Alibaba’s huge swathes of consumer data. Meanwhile, Alibaba’s investment could help the eCommerce business gain a firmer foothold in china’s film industry.

Alibaba’s latest deal follows earnings results

Alibaba reported its latest earnings results last week. There were some strong numbers, including a 56% revenue increase and strong growth in consumer numbers. However, the earnings per share of $1.63 missed expectations for $1.67.

What the release also underscored was that Alibaba is looking at long-term growth of the business and is matching its spending plans to its ambitions.

The eCommerce giant also raised its 2018 fiscal year growth guidance from a range of 49%-53% to 55%-56%.