The founder and CEO of Alibaba Group Holding Ltd (BABA), the charismatic Chinese billionaire Jack Ma, is on the verge of acquiring the storied Hong Kong newspaper South China Morning Post, according to a Bloomberg report from Monday morning.
The SCMP was once the most profitable newspaper in the world, the report says, but profits have now fallen for three consecutive years as readers increasingly migrate to the web and its subscriber base dwindles.
What Is BABA Stock’s Motive?
It’s curious that the BABA CEO should be making such a move, because it’s precisely what Jack Ma’s American analogue, Amazon.com (AMZN) CEO Jeff Bezos, did in 2013 when he snapped up the Washington Post for $250 million.
Bezos’ purchase was seen as a vanity purchase of sorts at the time. Since then, however, he has gradually incorporated the iconic newspaper into Amazon.com offerings, and in September, the e-commerce giant announced that Amazon Prime subscribers would receive six free months of the Post, before being offered a subscription at a reduced rate.
Considering there are 40 million Amazon Prime members in the U.S., that’s a pretty huge source of potential new subscribers.
It’s possible Ma is following the same strategy with SCMP. (Technically, he’s in talks to buy SCMP Group Ltd., which also does recruiting, magazines and other things, but the namesake newspaper is its biggest holding).
That said, Ma could also be trying to control the reputation of Alibaba and limit any negative exposure that could hit the BABA stock price.
South China Morning News has produced in-depth coverage on Alibaba in the past, including some not-so-flattering allegations around the prevalence of counterfeiting on the e-tailer’s website. Those fears have been partly responsible for decreasing investor confidence and a precipitous fall in the BABA stock price from its highs around $120 per share about a year ago.
Today, BABA stock trades for around $80.
Bottom Line
Whether Ma will be able to integrate SCMP into Alibaba itself, as Bezos did with the Post, is a bit more tenuous a proposition. But Ma certainly seems to be following Bezos’ lead, and recently BABA purchased Youku Todou (YOKU), often referred to as the “Chinese YouTube.”
Amazon, of course, is also heavily invested in online video, although it has built its own in-house streaming competitor to Netflix (NFLX), Amazon Prime Video.
With the BABA-SCMP deal allegedly in the final stages before closing, we’ll just have to wait and see what the price tag is — and if Ma will merely use the paper as a personal vanity project or if he’ll seek to integrate into his $200 billion company somehow.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
