Ever since 2014, when they managed to raise $25 billion through an initial public offering, Chinese e-commerce giant Alibaba has been trading on the New York Stock Exchange. The price started soaring through the years, reaching $185,49, which is a 173% rise from $68, the IPO value.
And now they have even bigger plans, looking forward to offering another round of 500 million ordinary shares, but this time for a listing through the Hong Kong Stock Exchange.
According to a report from Barron’s, Alibaba expects to raise as much as $14 billion after this move, which would be the largest so far this year.
Obviously, investors from the United States are the most concerned, as well as curious, especially those who own Alibaba’s ADS or want to buy new stock.
But there are no reasons to worry!
One of the most important aspects that need to be mentioned is that in Hong Kong, unlike in the United States, regulations allow retail investors to buy shares directly in a public offering.
This happens through prepayment and if the demand is bigger than the available stock, a part of the money will be returned to the investors, in a few days.
Alibaba revealed that the Hong Kong offer price will be set this Tuesday, after the closure of the market in the US. To be more specific, the closing price of the retailer’s ADSs on that specific day, divided eight times, will be the offer price for the new ordinary shares.
Nevertheless, the amount of potential retail investors in Hong Kong will pay an amount capped at 188 Hong Kong dollars, which is the equivalent of $24. Also, a price cap for institutional investors won’t exist, as these are expected to acquire around 97.5% of the new shares.
Alibaba declared that trading will begin on November 26, under the ticker 9988.
Nothing to do with restricting capital investments
There have been comments about Alibaba’s Hong Kong listing being a response to the growing concern that the United States will restrict potential capital investment in Chinese companies.
Despite all rumors, this is clearly not the main reason behind this decision, a source familiar with the matter revealed. All these events are recent and it’s been a few years since the retail giant has been exploring this opportunity.
As a matter of fact, ever since 2014, when it went public, Alibaba was considering a Hong Kong listing. Still, the local exchange didn’t allow this, due to the company’s former dual-class capital structure.
In the meantime, the rules in Hong Kong were loosened and several Chinese companies began offering shares on the bourse.
Therefore, it’s obvious that one of the main reasons behind the upcoming listing is Alibaba’s desire to reach a wider investor base and capital pool across Asia, a fact confirmed by an official statement released this Thursday.