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Alibaba Spends Big on Soccer Team ahead of IPO

Jun 6 2014, 3:21am CDT | by

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Alibaba Spends Big on Soccer Team ahead of IPO
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Alibaba Spends Big on Soccer Team ahead of IPO

Do sports teams and online shopping have synergies?

That’s what analysts and potential investors are wondering on Thursday after billionaire Jack Ma announced that his Chinese ecommerce giant Alibaba spent $200 million recently for a 50% stake in the Guangzhou Evergrande soccer team.

Alibaba is headed for one of the largest initial public offerings in history, with a valuation some expect to surpass $250 billion. But that IPO will be based on Alibaba’s massive ecommerce business, which facilitates more transactions per year than Amazon and eBay combined.

In recent months Alibaba has ventured outside of the ecommerce space — but its purchases have generally stuck to other Internet properties. For example, this year Alibaba invested over $1 billion for stake in online video site Youku Tudou. Such an investment could theoretically help Alibaba become a more competitive player across all of China’s burgeoning web-connected marketplace.

But a soccer team? That’s a truly head-scratching purchase. Plenty of billionaires use their own money to buy trophy teams — including Steve Ballmer’s recent $2 billion winning bid for the Los Angeles Clippers — but few public companies own sports franchises. Those that do tend to be entertainment conglomerates, like the Madison Square Garden company’s ownership of the New York Knicks and Rangers.

And if Wall Street onlookers are wondering what Jack Ma is thinking, his stated rationale won’t win many supporters. Here’s what The Wall Street Journal reports Ma said in a news conference:

“It’s actually cheap,” Mr. Ma said, adding, “I had no idea how much a soccer club is worth.”

Mr. Ma said coming from outside of soccer gives him a different perspective and might embolden him to break rules, which could help improve the club. “I think not understanding soccer doesn’t matter. I also didn’t understand retail, e-commerce or the Internet, but that didn’t stop me from doing it anyway,” he said.

Maybe Ma is right. He has certainly been extraordinarily successful in his other ventures. And the sport of soccer does have plenty of room to grow in China. But that still doesn’t explain why he bought the team through Alibaba, instead of out of his own pocket, when he admits to not knowing much about the sport at all and points to no obvious synergies.

Guangzhou Evergrande was previously owned outright by property developer Evergrande Group, controlled by another Chinese billionaire – Hui Ka Yan. Last year, the team became the first Chinese squad to win the Asian Champions League.

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