24/7 Wall St.

In a filing with the U.S. Securities and Exchange Commission (SEC) last Friday, Alibaba Group Holding Ltd. (NYSE: BABA) revealed that it had acquired 32.972 million shares of class A common stock (about 5.6% of shares outstanding) in Groupon Inc. (NASDAQ: GRPN). Groupon’s stock was up more than 20% Tuesday morning.

Groupon debuted as a publicly traded company in October 2011 at an initial public offering price (IPO) of $20. One week ago, the shares hit an all-time low of $2.15.

Alibaba likely filed with the SEC because its stake rose above 5% of Groupon’s outstanding shares. There is no information on how much Alibaba paid for the shares.

Is the purchase the first step toward Alibaba acquiring a majority stake in or even the entire company? What does Groupon bring to the table?

Groupon had $0.04 in earnings per share (EPS) on $917.2 million in revenue in the fourth quarter of 2015. That compares to consensus estimates that called for a breakeven in earnings on revenue of $841 million. In the same period last year, it posted $750.36 million in revenue.

The coupon company currently operates in 28 countries. That number has been pared from 45. Even so, the international footprint is a plus for Alibaba, which wants a wider international presence.

Another reason for Alibaba’s interest in Groupon is the U.S. company’s group buying capability. The Chinese firm has had little luck developing that on its own, and even a minority stake of 20% to 30% could lead to a strategic alliance or joint venture with Groupon that saves Alibaba considerable development time. Alibaba does not need to buy all of Groupon to get what it wants and needs.

Groupon’s shares traded at $3.94 a little more than an hour after the opening bell on Tuesday, up more than 36% from Friday’s close. The stock’s 52-week range is $2.15 to $8.37.

Alibaba shares traded up more than 7%, at $65.39 in a 52-week range of $57.20 to $95.06. The company’s all-time high of $119.15 was posted in mid-November of 2014.