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Alibaba To Raise $13.4 Billion in Hong Kong Second Listing

Coresight Research

Key Points

Chinese e-commerce services company Alibaba Group has filed for a second listing in Hong Kong.

  • Following the Double 11 Global Shopping Festival, Alibaba made headlines again in the same week with its secondary listing in Hong Kong, to raise $13.4 billion.
  • Amid turmoil in Hong Kong, Alibaba’s listing was a vote of confidence in the region as an international finance center and fundraising opportunity.
  • The company’s listing will fund its business expansion plans and investment in technology. The listing is possibly a move to avoid sanctions from US regulators, and it taps into a substantial new capital pool in Asia, building an around-the-clock trading market for global investors.

In the same week of the Double 11 Global Shopping Festival (also known as Singles’ Day), Alibaba made headlines again with its secondary listing in Hong Kong, to raise $13.4 billion. This was expected be the world’s largest fundraising by equity this year, before news broke of oil company Saudi Aramco’s plan to list next month, which is expected to raise $25.6 billion.

Alibaba originally filed for a Hong Kong listing in June and had hoped to raise up to $20 billion before the plan was stalled amid deepening political unrest in the city. The company then kicked off its roadshow on November 13, seeking to sell 500 million shares in its second listing in Hong Kong. The pricing is set to be not more than HK$188 ($24.02) per share and will be confirmed on November 20. Shares will be listed in Hong Kong on November 26 under the ticker 9988. The company’s investment bankers have the option to sell an additional 15% of shares depending on demand.

Alibaba Votes for the Future of Hong Kong

The share listing is a victory for Hong Kong and the bourse. Amid unrest in the city, Alibaba voted for it to be the location for its second listing, reassuring Hong Kong’s status as an international finance center and indicating the attractiveness of the regional market as a source of funding. The local bourse has seen fundraising activity at a low level in the past few months. “During this period of ongoing change, we continue to believe that the future of Hong Kong remains bright,” said Alibaba’s Executive Chairman Daniel Zhang in a letter to investors. “We hope we can contribute, in our small way, and participate in the future of Hong Kong.”

Alibaba’s Listing Will Provide Funds for Its Expansions

Alibaba plans to use the listing’s proceeds to fund the expansion of its businesses—including food delivery group, online travel agency Fliggy and video platform Youku—as well as investments in technology, including machine learning and cloud computing. The e-commerce company has been investing heavily to actualize its “New Retail” model. Most recently, Alibaba increased its stake in logistics business Cainiao, from 51% to 63% with a $3.3 billion investment on November 8.

Implications of the Listing

As we analyzed in a previous report, the listing is possibly a move to avoid sanctions from US regulators in the event that the US-China trade dispute drags on and spills into other areas.

The move will also give Alibaba another large market for its shares and bring in investors that are more familiar with the company and with Asia Pacific, allowing more users and stakeholders in the Alibaba digital economy across Asia to invest in the company. Chinese and Hong Kong investors more familiar with the company may be more keen to trade the stock, potentially bringing a higher valuation at home. In addition to expanding its investor base to Asia, the offering will create a nearly around-the-clock market for global investors to trade Alibaba shares.

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