Chinese e-commerce giant Alibaba Group Holding Ltd has filed confidentially for a listing on the Hong Kong stock exchange, in a move they hope will generate $20 billion of liquidity.
The listing, revealed by anonymous sources to a number of publications, will be the company’s second share sale, after its $25 billion float on the New York Stock Exchange in 2014 - an IPO that still holds the record as the biggest in history.
“The person with knowledge of the matter was not authorised to speak with media and so declined to be identified”, said CNBC.
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The listing is projected to become Hong Kong’s second-largest sale of all time, following the AIA Group’s 2010 IPO. Alibaba has a market capitalisation of $418 billion, and revenue in fiscal 2019 reached $54.4 billion.
At the time of its initial public offering, Alibaba had planned to list simultaneously on the Hong Kong stock exchange, but, as the New York Times describes, “the tech firm's management structure clashed with the city's listing rules.” However, “Hong Kong Exchanges & Clearing, the city's bourse operator, changed its listing rules last year - primarily with the aim of attracting Chinese tech groups.”
The bourse’s rule change included a provision that would allow companies to file confidentially.
Bloomberg, who initially reported the news, speculates on the reasoning behind the decision to sell shares again: “The deal could help finance a costly war of subsidies with Meituan Dianping in food delivery and travel, and may also divert investor cash from rivals like Meituan and WeChat-operator Tencent Holdings Ltd.”
Writing separately in Bloomberg, Tim Culpan and Nisha Gopalan explained the political dimensions of the decision: “By coming closer to home, Alibaba shows Beijing where its loyalties lie; and authorities can revel in what they see as an example of China’s growing power. You can just imagine the state-media editorials crowing about this evidence of the US's decline.”
Reuters agrees there are geopolitical considerations behind the move, saying a cash-generating sale is a “priority for China as economic growth slows and a trade spat with the United States intensifies.”
Alibaba, whose co-founder and executive chairman Jack Ma retired in September 2018, is expected to offer its stock with investment banks China International Capital Corp and Credit Suisse, sources revealed.
“News of Alibaba’s filing sent shares in affiliated firms soaring,” reported Bloomberg. “New Huadu Supercenter Co. and Sanjiang Shopping Club Co., both backed by the e-commerce giant, rose by their 10% daily limits on mainland exchanges. China TransInfo Technology Co., in which an Alibaba affiliate will take a 15% stake, gained as much as 5.4% in Shenzhen. And CICC climbed as much as 1.8% while the Hong Kong market was down a tad.”
This represents positive news at a fraught time for Hong Kong, as protests over a proposed extradition treaty with mainland China continue to destabilise the semi-independent city.
The protests have “raised concerns over the potential impact on the city’s financial market and businesses,” according to Reuters. “On Thursday Logistics real estate developer ESR Cayman Ltd... pulled what would have been the largest Hong Kong listing so far this year, citing ‘current market conditions’.”
