Alibaba raises Hong Kong listing to baseline, unlocking billions in potential investment

Alibaba Group will raise its Hong Kong shares to a basic listing on Aug. 28, potentially unlocking significant capital flows from mainland China. The move, approved by shareholders, gives Alibaba access to $19.5 billion in new investment through its Stock Connect program.

Alibaba converts Hong Kong shares to primary listing, aims to tap mainland Chinese capital

Alibaba Group, the Chinese e-commerce giant, is converting its Hong Kong shares to a primary listing, a move that could give the company access to significant capital flows from mainland China, continuing a plan it originally proposed a little over two years ago.

In 2014, the Hangzhou, China-based company listed on the New York Stock Exchange, raising nearly $22 billion in the largest-ever U.S. IPO. In 2019, Alibaba raised $13 billion with a secondary offering in Hong Kong.

Alibaba’s board has filed an application to list the Hong Kong-based company’s shares on a primary exchange in 2022. Shareholders gave final approval to the application on Aug. 23, according to documents filed with the Hong Kong Stock Exchange.

Alibaba’s Hong Kong stock market listing will go up on Aug. 28. The company said in its filing that no new shares will be issued.

The company’s Hong Kong-listed shares were up just 0.8% at 3:15 p.m. local time on Aug. 23 during the Hong Kong trading session.

Alibaba gains access to mainland capital through Stock Connect, but faces challenges amid competition and economic slowdown

As a result of the update, Alibaba shares can now participate in Stock Connect, a program that connects the Hong Kong Stock Exchange with the Shanghai and Shenzhen stock exchanges.

Qualified investors from mainland China can buy Alibaba shares by participating in Stock Connect. Bloomberg predicts that Alibaba could receive up to $19.5 billion in capital inflows in the first six months of its participation in the program.

Since October 2020, when Alibaba shares hit an all-time high, they have fallen by about 70%.

New competitors like PDD Holdings’ Pinduoduo and ByteDance’s Douyin are threatening Alibaba’s e-commerce operations. A slower-than-expected recovery in consumer spending in China is also weighing on Alibaba’s growth.

Geopolitics also affects Alibaba’s business. Last year, the company backed off plans to set up a standalone cloud-computing unit, attributing the decision to U.S. export restrictions on sales of advanced chips to China.

Alibaba’s quarterly revenue of 243.2 billion yuan ($34.1 billion) fell short of expectations last week. Despite the rise in order frequency, revenue from Alibaba’s e-commerce unit, which still makes up the bulk of its business, fell 1% annually to 113.4 billion yuan ($15.9 billion). Revenue from cloud computing rose 6% to 26.5 billion yuan ($3.7 billion).