Alibaba buys nearly 33 million shares of Groupon

Groupon Inc. signage is displayed at company headquarters in Chicago Illinois

The buy provides the Chinese e-commerce powerhouse a few 5.6 per cent stake in Groupon.

Shares of Alibaba, which was founded by Jack Ma, ran up 9% on Tuesday. The Chinese entities are keen to purchase stakes in different startups rather than starting their own operations.

A spokesperson for Groupon said last Friday that the company was not aware of the stake taken by Alibaba until the Friday filing.

Groupon's (NASDAQ:GRPN) spokesperson Bill Roberts was quite pleased with the announcement and highlighted that Alibaba has a well-established image for being a long-term shareholder. Then, Groupon reported decent quarterly results, and saw its shares climb 29 percent on Friday, to $2.89. It also starts what will certainly be a lot of talk about whether Alibaba might be angling to acquire all of Groupon outright. Another beneficiary of Groupon's stock rally was Yahoo Inc. And with$917.2 million in revenue in Q4 against expectations of $845.9 million, the new strategy appears to be working. In November, the company replaced Chief Executive Officer Eric Lefkofsky with Rich Williams, who has increased the marketing budget in an effort to revive and reinvent the one-time Internet darling.

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The company announced that profit excluding certain costs was 4 cents per share in comparison to analyst's estimates of break even for the quarter.

Mr. Williams further highlighted that the company's focus is not on the acquisitions or getting acquired, but rather on building "a great business".

In a recent interview with Bloomberg TV, Williams said Groupon's stock was undervalued. The company has exited 17 countries and now operates in 28 as it continues to streamline its operations internationally.

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