HONG KONG (Reuters) – Alibaba is considering raising as much as $20 billion by way of a secondary listing in Hong Kong, people familiar with the matter told Reuters, as the lining of a second blockbuster deal following its 2014 record of $25 billion float in New York.
FILE PHOTO: A logo of Alibaba Group is seen at an exhibition during the World Intelligence Congress in Tianjin, China-May 16, 2019. REUTERS/Jason Lee
The deal, which would be the sixth-largest follow-on sale of shares ever, would give Alibaba a war chest to continue to invest in technology is a priority for China as growth flags, the world’s second largest economy is faced with a growing trade fight with the United States.
The e-commerce giant is working with financial advisers on the offer and is aimed at the submission of an application as confidential in Hong Kong in the second half of the year 2019, three people said on condition of anonymity because the plans are not yet public.
She warned that many details were not clear, including the planned size. A person with direct knowledge said that it is more likely to be between $10 billion and $15 billion.
At $20 billion, Alibaba’s deal would rank behind NTT’s 1987 $36.8 billion sales, crisis-era offer of $24.4 billion and $22.5 billion of the Royal Bank of Scotland and Lloyds Banking Group, as well as the $20.7 billion raised by the US insurer AIG in 2012, Refinitiv data shows.
A spokesman for Alibaba declined to comment.
Bloomberg was the first to report that the planned secondary listing. (bloom.bg/2YRpEdi)
Since the US listing, Alibaba has almost doubled in size, to 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 on the liquidity and possible a better appreciation as the household name was a favourite among retail investors in Hong Kong.
Rival Tencent, which is listed in Hong Kong, is trading at 26 times expected earnings, compared with Alibaba is 22 times in New York, according to Refinitiv data.
Alibaba’s revenue growth is slowing compared to the peak in the beginning of 2017 as China’s e-commerce industry matures.
Analysts argue that the company has started with the exhaust of the potential user group of e-commerce customers in the top Chinese cities, which creates a bottleneck for the sale.
In recent years, it has expanded into new sectors, such as cloud computing division and the Hema, a chain of brick-and-mortar supermarkets – both of which need a high upfront investment.
An Alibaba float would be seen in Hong Kong as a victory, after the lost city of the tech giant’s initial public offering to New York, because the former rules precluded the acceptance of Alibaba’s governance structure, where a self-selecting group of senior managers the control of the majority of the board of directors appointments.
Hong Kong last year changed rules to make it easier for “innovative businesses” in New York or London to perform a secondary listing in Hong Kong, as part of a wider shake up of the city, the entry of the regime.
The new rules are already-listed companies based in China, of which the original float was for Dec. 15, 2017, in the city, even if their current weighted voting right structures in violation of Hong Kong’s the rules for primary offerings.
Such companies can also apply confidential for a listing, as Alibaba is expected.
At the beginning of last year, when Hong Kong was preparing to dual-class share offerings, Alibaba founder Jack Ma said the company would seriously consider” a listing on the stock exchange.
So far, no company has made use of the secondary listing rules to raise money in Hong Kong.
Reporting by Kane Wu, Sumeet Chatterjee and Julie Zhu in Hong Kong and Saumya Sibi Joseph (and) aditi Sebastian in Bengaluru; Additional reporting by Alun John; Writing by Jennifer Hughes; Editing by with the ipad has Himani