Michael Burry of 'The Big Short' Sells Alibaba, Calls It 'Too Expensive,' Buys This Stock Instead

Michael Burry, the investor known for betting on the U.S. housing market collapse depicted in 'The Big Short,' has criticized Alibaba (09988-HK) for being overvalued and revealed he has recently exited his position in the Chinese tech giant, shifting instead to build a 'large' new stake in its competitor, JD.com (09618-HK).

According to Bloomberg, Burry stated on Substack that he had originally planned to reinvest the majority of his capital into Alibaba within one or two months, but has now changed his mind. He emphasized that he will not regain investment interest in Alibaba unless its stock price drops to about half of its current level.

Burry is the founder of Scion Capital Management and rose to fame for correctly predicting the U.S. housing market downturn before the 2008 global financial crisis.

His comments come as Alibaba announced plans to raise approximately HK$80 billion (about US$10.2 billion) through a new share issuance to fund AI investments. If completed, this would become the largest equity fundraising by a listed company in Hong Kong's history.

Regarding Alibaba's decision to raise capital via new share issuance, Burry bluntly stated, 'I cannot support issuing new shares,' and expects the company's return on invested capital (ROIC) to continue declining.

Alibaba recently released its quarterly earnings for the period ending June, reporting a 75% year-on-year drop in profit. The company's increased capital spending on AI has further intensified investor concerns about the future return prospects of China's tech sector.

Stock performance has also been under pressure. Alibaba's American Depositary Receipts (BABA-US) have fallen 18.6% year-to-date, plunging 8.6% on last Friday (21st) alone. Its Hong Kong-listed shares have declined 13.9% so far this year.

Notably, Burry had only disclosed establishing a new position in Alibaba in April this year.

On Sunday (23rd), Alibaba separately announced that the pricing for the new share issuance would be HK$112.70 per share. In comparison, the stock closed at HK$123 on the Hong Kong market last Friday.