Alibaba Group, the title holder for world's largest IPO, has announced plans for a massive secondary stock offering in Hong Kong to take place in late November, in a vote of confidence for the local financial market as the worst political crisis in the city’s history threatens its status as a global financial hub.
According to public filing, China's e-commerce giant will issue 500 million new shares, with 487.5 million set aside for international offering and the rest for Hong Kong public. The offering, which was approved by the Hong Kong stock exchange, includes a 75 million share greenshoe option and aims to raise between $10 billion and $15 billion from the sale which would make it the biggest equity fundraising of the year.
Despite the Hong Kong sale, Alibaba, which raised a record $25 billion in 2014 in New York, will retain its US listing, because of its deep capital markets while the group taps into the growing pool of funds in Asia with its latest plan.
According to the SCMP, the massive stock sale will give a much needed boost for the city gripped by more than five months of anti-government protests and a simmering US-China trade war, pushing the local stock exchange on a home run for global IPO crown this year in competition with the New York Stock Exchange and Nasdaq.
BREAKING: #Alibaba secondary listing in Hong Kong to happen at end of November:— Arjun Kharpal (@ArjunKharpal) November 13, 2019
- Will raise about $13 billion (biggest fundraise this year)
- 500 million shares to be issued
- 75 million shares for greenshoe option
- Will stay listed in UShttps://t.co/YM795EfJND$BABA
The move represents a major boost for the city gripped by more than five months of anti-government protests and a simmering US-China trade war, and puts the local stock exchange on a home run for global IPO crown this year in competition with the New York Stock Exchange and Nasdaq.
Alibaba has been working on a plan to list its shares in Hong Kong – what the company calls its “natural first choice” – since it abandoned the local market for New York in 2014, according to people familiar with the matter. Part of the motivation is to give its army of online shopping customers in mainland China and elsewhere in Asia the opportunity to own its shares.
Hong Kong Financial Secretary Paul Chan Mo-po said Alibaba’s secondary listing is “a testimony of Hong Kong’s status as a premier listing platform.”
Quoted by SCMP, "The tension between the US and China in the areas of trade and technology has added to the attractiveness of Hong Kong as an international listing platform for mainland tech companies,” Chan said in response to queries by the Post before the filing. “We strive to become the preferred listing platform for companies in the innovative and technology sector."
The green light clears the path for Hangzhou-based Alibaba to start a weeklong roadshow this week to drum up interest from institutional and retail investors. The shares in international offering are expected to be price on November 20 or no later than November 25, according to the SEC filing. They will begin trading in Hong Kong on November 26. Cornerstone investors, a unique feature of Hong Kong’s financial market where large investors are invited to anchor important public offerings, will be absent because the shares are so much in demand, according to people familiar with the plan.
With so much attention falling on major shareholder Softbank in recent weeks, key SoftBank executives have agreed to a 90-day lock up on their stakes under the listing plan. Every eight newly issued shares in Hong Kong will be equal to one American Depositary Share traded in New York, the SEC filing shows. Based on the ADS closing price of US$186.97 on November 12, it could raise between US$11.63 billion and US$13.37 billion in Hong Kong, Alibaba said. The secondary listing in Hong Kong would swell the market value of Asia’s biggest company, and rank it the biggest offerings in Hong Kong in almost a decade. At the top end of US$15 billion, the deal would be the largest after insurance group AIA’s HK$159 billion IPO in 2010 and Industrial and Commercial Bank of China’s HK$124.95 billion deal in 2006.
After Hong Kong stocks rebounded their worst quarter in four years, fundraising returned to Hong Kong as dozens of companies including Budweiser Brewing Company APAC and ESR Cayman have raised a combined US$11.53 billion. Alibaba’s plan, even at the lower end of the range of US$10 billion, will catapult Hong Kong to the summit of global IPO league this year.
A Hong Kong listing may also finally give mainland China’s investors the chance to participate in the growth of one of the country’s most profitable technology giants, should China add Alibaba to its Stock Connect programme in the coming months, sources said.
“It is going to be a hot deal,” said Jojo Choy Sze-chung, vice-chairman of the Institute of Securities Dealers. “Alibaba already has several good e-commerce platforms and other profitable businesses. It should not be a problem for the company to raise up to US$15 billion.”
Alibaba’s impending offering follows the recent conclusion of its 2019 Singles’ Day online shopping gala, when a record US$43 billion of merchandise were sold in the 24-hour shopping spree. American pop diva Taylor Swift headlined this year’s shopping festival with a curtain-raiser showpiece in Shanghai.