Alibaba offloads Lingxi Games stake to Trustar Capital in $1.5 billion to $2 billion deal
The transaction, agreed on 17 August, sees private equity firm Trustar Capital acquire the remaining stake in the game studio, while Alibaba redirects capital towards its Qwen large language model family and cloud computing division.
Alibaba Group has agreed to sell its entire stake in game studio Lingxi Games to private equity firm Trustar Capital, a transaction valued between $1.5 billion and $2 billion. The deal, announced on 17 August, marks the latest step in the Chinese tech giant’s strategy to divest non-core assets and concentrate resources on artificial intelligence and cloud computing.
Under the terms of the agreement, the management team at Lingxi Games, including chief executive Zhou Bingshu, will remain in place. This continuity allows Alibaba to exit the gaming sector without restructuring the unit, aligning with a broader pattern of shedding assets such as the Sun Art hypermarket chain and department store operator Intime.
The sale underscores Alibaba’s focus on its open-source large language model family, Qwen. The company is leveraging the model as a pipeline for cloud infrastructure, as developers utilising Qwen require hosting and storage services from Alibaba Cloud. The Qwen application has surpassed 100 million monthly active users, contributing to a surge in demand for the group’s computing resources.
Financial performance in the cloud segment has strengthened significantly, with revenue growing 34 per cent in the latest fiscal year. AI-related product revenue has posted triple-digit growth for eleven consecutive quarters, and the cloud segment grew 38 per cent year-on-year to $6 billion in a recent quarter, solidifying Alibaba’s position as the leading cloud provider in the Asia Pacific region.
The divestment also reflects a desire to mitigate regulatory risks and focus on higher-margin growth areas. Lingxi Games had previously explored external fundraising in late 2023, a process that stalled following proposals for tighter regulations on online gaming in China. While the gaming sector has since rebounded, the episode highlighted the volatility of Chinese policy, a risk factor that continues to influence investor sentiment.
Institutional ownership has seen some contraction, with hedge fund holdings decreasing to 102 funds from 115 in the previous quarter, despite Alibaba shares rising 27.4 per cent in July. Short interest remains low at 1.78 per cent of the float, and buybacks have reduced shares outstanding by 8.5 per cent over the past three years. The stock currently trades at 17.01 times forward earnings, a valuation that investors are watching closely as the company executes its strategic pivot.
