For investors and a buffer, Alibaba seeks a Hong Kong primary listing

Business
By Editor_1
A man walks past the Alibaba Group office building in Beijing, China August 9, 2021 - Tingshu Wang/Reuters
0
By Paul Mozur

HONG KONG – Alibaba, the Chinese online shopping giant, said Tuesday (26) that it would seek a primary listing in Hong Kong, a move that would eventually allow more people in mainland China to invest in it, and give it a buffer in case it is forced to delist in the United States over regulatory concerns.

The listing is the latest signal that Chinese companies are looking for ways to mitigate risk as they find themselves under pressure from regulators on both sides of the Pacific. It also shows how the one-time love affair between Chinese tech firms and Wall Street is drawing to a close.

Over the past two years, Chinese firms seeking capital in the United States have struggled amid a broad Chinese regulatory crackdown on Big Tech. Alibaba’s financial affiliate, Ant Group, called off a blockbuster US listing at the last minute at the behest of Chinese regulators. A separate investigation into the ride-hailing firm Didi led it to pull its shares only six months after a float in New York.

At the same time, US regulators have been working to enforce Trump-era rules that require better auditing disclosures. China’s government has insisted that much of the information, in particular sensitive data collected by internet firms, cannot be shared abroad. Although discussions between American and Chinese regulators are ongoing, the disagreements could result in the delisting of hundreds of Chinese companies.

For Alibaba, the new Hong Kong listing arrangement offers the company a safety net against such risks. It also gives the company a boost by making it more accessible to millions of Chinese traders, who have thus far had only limited ability to buy shares in a company they shop on everyday. Alibaba’s shares rose more than 5% in Tuesday morning trading in Hong Kong on the listing news.

Although Alibaba was already trading in Hong Kong, the new listing process will help it take advantage of a program that connects the Hong Kong bourse to those in China. Alibaba said in a filing that it expected to complete the process by the end of the year.

“Hong Kong is also the launchpad for Alibaba’s globalization strategy,” the company’s CEO, Daniel Zhang, said in a statement. He added that the new listing would foster “a wider and more diversified investor base to share in Alibaba’s growth and future, especially from China and other markets in Asia.”

The dual listing marks a major shift from less than a decade ago, when Alibaba conducted the biggest initial public offering in the world by selling its shares in New York in 2014. At the time, the company was the emblem of a fast-growing and quickly innovating Chinese tech sector that appeared to be taking the world by storm.

But since 2020, Alibaba’s share price has more than halved as a result of a crackdown by Chinese regulators, as well as harsh COVID control measures that have hurt domestic spending. The Chinese government has imposed a series of major fines on the country’s largest internet firms. Alibaba was ordered to pay $2.8 billion for antitrust violations in 2021; just last week, Didi, the ride-hailing giant, was charged $1.2 billion.

Analysts have said that regulators may ease pressure on Chinese internet companies to help boost sagging economic growth. But many regard Beijing’s tightened grip on Big Tech a feature that is here to stay.

-New York Times

 

 

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