Alibaba plans bumper $20 billion HK listing to boost investment war chest

HONG KONG: Alibaba is considering raising as much as $20 billion through a listing in Hong Kong, people familiar with the matter said, lining up a second blockbuster deal following its 2014 record $25 billion float in New York.
The deal, the biggest follow-on share sale in seven years globally, would give Alibaba a war chest to keep investing in technology – a priority for China as growth flags and as the world’s second-largest economy is locked in a mounting trade spat with the United States.
The e-commerce giant is working with financial advisers on the offering and is aiming to file an application confidentially in Hong Kong as early as the second half of 2019, three people said on condition of anonymity as the plans are not public yet.
While advisers and others close to the deal downplayed any trade war reasoning for the move, analysts said the context and geography could not be ignored.
“For Chinese companies listed in the United States, one has to prepare a contingency plan,” said Hao Hong, head of research at broker BOCOM International.
“Given most of the Alibaba investors are in Asia, it makes sense to come closer to your home base and give investors an option to trade in the same time zone.” Last week, Chinese chipmaker SMIC said it was delisting its New York shares in favour of focusing on its Hong Kong listing.
Sources with knowledge of Alibaba’s plans cautioned that many details were not yet clear, including the final planned size. One person with direct knowledge said it was more likely to be between $10 billion and $15 billion.
At $20 billion, Alibaba’s deal would be the sixth-biggest follow-on share sale ever, Refinitiv data shows.
It would rank behind NTT’s 1987 $36.8 billion sale, crisis era offerings of $24.4 billion and $22.5 billion from the Royal Bank of Scotland and Lloyds Banking Group, and the $20.7 billion raised by US insurer AIG in 2012.
SoftBank Group, Alibaba’s largest investor, did not immediately respond to a request for comment.
The Japanese tech investor has a 28.8 per cent stake, worth $115.7 billion, in Alibaba after it sold a small part of its original holding via derivatives to fund its acquisition of chip designer ARM in a transaction that completes next month.
SoftBank founder and CEO Masayoshi Son is a close friend of Alibaba founder Jack Ma.
Bloomberg was the first to report the plan for a Hong Kong listing.
Since its US listing, Alibaba has nearly doubled in size to become the largest-listed Chinese company with a market value of more than $400 billion.
A Hong Kong listing would give mainland investors their first direct access to one of China’s biggest success stories, via the stock connect trading link between Hong Kong, Shanghai and Shenzhen.
It would also give the company an extra pocket of liquidity and potentially a better valuation if the household name became a favourite among retail investors in Hong Kong.
An analyst said while Alibaba is not in need of cash, the listing could help it improve its access to loans from Asian banks. “It means closer access to Chinese investors, and maybe Chinese investors are more bullish than the global investors in Alibaba,” the analyst added. — Reuters