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alibabaAlibaba, the giant Chinese e-commerce retailer, has taken a large equity stake in Seattle-based Zulily, according to SEC filings.

“We have great respect for the team at Alibaba and all that they have built,” said Zulily CEO Darrell Cavens in a statement emailed to GeekWire Friday night. “We are honored to welcome them as shareholders of our company.”

Alibaba purchased a big block of Zulily stock on May 6th, continuing the share purchases through Friday. It paid between $10.80 and $12.70 per share, and according to a SEC filing is now classified as a “10 percent owner.” An entity by the name of Des Voeux Investment Company Limited, a subsidiary of Alibaba Group Treasury Limited, purchased the Zulily shares.

A SEC filing indicated that Alibaba already owned 6,687,575 shares of Zulily. Through a series of trades over the past two days, Alibaba appears to have boosted its stake in the seller of kids toys, clothing and fashion for women to a total of 11,500,000 shares.

Various stock tracking services list the number of outstanding shares differently, with Google Finance saying 61.3 million and MSN Money listing the number at 66.8 million. Those are class A shares, with Yahoo Finance reporting the total number of outstanding shares at about 123 million. According to Zulily’s last financial report, there were 124 million outstanding shares as of March 31.

Given the total outstanding shares, it now appears that Alibaba is one of Zulily’s largest shareholders with a stake of nearly 10 percent.

According to one of the SEC documents, Alibaba purchased 4.8 million shares of Zulily between May 6th and May 8th at a cost of about $56 million.

Zulily did not answer additional questions about its new shareholder.

The move comes at a time when both Alibaba and Zulily are struggling on Wall Street, and as competition with Amazon intensifies. Shares of Alibaba are down 16 percent so far this year, with CEO Jack Ma saying this week that the company “developed too quickly.” As a result, Ma recently implemented a hiring freeze.

Zulily CEO Darrell Cavens
Zulily CEO Darrell Cavens

Zulily, best known for selling children’s products, also isn’t faring well. Its stock is off 43 percent this year, tumbling this week after another poor financial report that disappointed shareholders. One stock analyst even suggested that Zulily’s recent poor performance indicated that the “lily was wilting.”

Alibaba’s equity stake in Zulily is interesting on a number of fronts.

An alliance between the two companies could serve a dual purpose, assisting Alibaba as it expands in the U.S. while at the same time helping Zulily move into Asia.

It also connects the two companies as they compete against rival Amazon.com. Alibaba last year established an engineering center in Seattle, one of a number of large technology companies mining the region for tech talent. (See GeekWire’s list of engineering outposts here). Having an e-commerce partner in Amazon’s backyard, could be a strategic move for Alibaba, possibly even opening for a bigger alliance between the two companies down the road, and perhaps a full acquisition of Zulily.

At its current stock price, Alibaba is valued at $214 billion, a bigger company than Amazon in terms of market value. Meanwhile, Zulily is valued at $1.4 billion.

Interestingly, the investment in Zulily comes just a few days after a disclosure that that Alibaba is an investor in Jet.com, an online retailing upstart created by the founder of Quidsi.

Here’s a look at the shares of Alibaba (in red) and Zulily (in blue) so far this year.

zulily-alibabashares3

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