Seeking Alpha

Tencent takes aim at Alibaba with investment/partnership

As rumored, Tencent (TCEHY) is buying a 15% stake in top Alibaba (ABABA) rival ahead of its IPO.

Tencent is paying $214.7M in cash. The company is also transferring its QQ Wanggou and Paipai e-commerce platforms, and a minority stake in its Yixun marketplace.

The assets, along with the massive scale of Tencent's QQ, Qzone, and WeChat messaging/gaming/social networking platforms, should give a boost to's traffic and marketing reach., which (unlike Alibaba) depends heavily on direct e-commerce sales, filed for a $1.5B IPO in January. Alibaba took aim at Tencent last year by acquiring an 18% stake in Sina's Weibo microblogging platform (an indirect rival to WeChat).

The Tencent/ deal could also spell tougher competition for Vipshop (VIPS -4.4%) and Dangdang (DANG -4.9%), both of whom are joining other Chinese Internet stocks in seeing profit-taking.

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