Alibaba Group Holding raised about $11 billion in a long-awaited Hong Kong stock sale, braving the worsening political unrest gripping the city and potentially gaining favour in Beijing, reported Bloomberg.
China’s biggest e-commerce company said that it has priced the shares at HKD 176 each, a small discount to the last close of its American depositary shares in New York. The offering was covered multiple times and more shares were allocated to individual investors due to strong demand, according to people with knowledge of the matter.
Pulling off the sale in the midst of unprecedented civil unrest in Hong Kong is a coup for Chief Executive Officer Daniel Zhang. It could swell Alibaba’s cash pile to about $44 billion, more than any other internet company and roughly double that of arch-rival Tencent Holdings. And it’ll please local and Chinese officials trying to persuade the world that the troubled city still has a future as a financial hub.
“Alibaba is not really doing the sale because it needs the proceeds, Alibaba is doing the offering because it believes that having a Hong Kong listing is in its strategic interest.” said Stephen Peepels, a partner at law firm Hogan Lovells.
One question now is how Alibaba, which in recent years made investments in areas from logistics to online television, will put the money to work. One area might be Southeast Asia’s e-commerce market, where Tencent-backed Shopee has been making inroads.
Zhang could also use the capital to invest in new technologies like artificial intelligence or fast-expanding affiliates such as Ant Financial Services Group.
The offering caps a dramatic few days for Hong Kong’s stock market. The Hang Seng Index started the week strong, rallying on partly on optimism about a US-China trade deal.
As protests snarled transport networks, bankers working to complete the Alibaba offering had to find workarounds. An investor luncheon—the traditional way of kicking off book building for deals—was called off and replaced by phone meetings. Still, the deal drew orders from long-term buyers including China-focused funds and sovereign wealth funds, according to a message distributed to investors.
It’s a homecoming of sorts for Alibaba, whose decision to hold its $25 billion initial public offering five years ago in New York dealt a blow to Hong Kong’s ambitions. Stung in part by the loss of Alibaba, the city last year reversed a longstanding policy of not allowing the dual-class share structures tech founders favour as a way of retaining control.
The efforts to lure Alibaba went all the way to the top of Hong Kong’s government, with Chief Executive Carrie Lam exhorting billionaire founder Jack Ma to consider a listing in the city. Ma had taken Alibaba’s business-to-business platform public in the financial hub in 2007 but took it private five years later—paying the same price it listed at.
China, locked in a trade war with the US, has been pushing companies like Alibaba to list on the mainland. Alibaba was one of the firms at one point expected to go public there using so-called Chinese depositary receipts, a regulatory project that later fizzled.