Internet giant, Alibaba is ready to start pre-IPO roadshows in Hong Kong next week. It is reported that Alibaba’s IPO team will negotiate pricing discounts with a number of institutional investors. However, Alibaba declined to comment on the issue.
According to earlier reports from Reuters, Alibaba is eyeing an IPO in Hong Kong with expectations of raising $10-15 billion, which will become the world’s largest new stock of 2019. CICC and Credit Suisse will act as underwriters. Alibaba is thought to have submitted their application discretely in June with hopes of listing in August, however the unrest in Hong Kong forced the company to postpone the process.
Alibaba’s decision to list in Hong Kong will provide greater access to China’s burgeoning investor community, who will not have to deal with transferring capital to the US, and the cumbersome time difference. The exchange in Hong Kong loosened their restrictions in 2018, allowing secondary listings and pre-revenue companies that wished to list on the bourse. Firms can also issue dual-class shares. Alibaba has previously pursued a Hong Kong IPO but was denied because of stringent regulations on dual listings.
Alibaba, founded in 1999 as an e-commerce platform, is currently one of China’s largest internet powerhouses. The company listed on the New York Stock Exchange in 2014 raising $25 billion within the first day, making it the world’s largest IPO in history.
Why list in Hong Kong?
- To provide their 693mm users the opportunity to owns shares via Southbound Connect since Mainland investors have limited access to foreign markets.
- The company likely believes US investors aren’t valuing the company properly
The stock is off its all-time high of $210, which it reached back in June 2018 as trade war concerns weigh on the stock despite the company’s fundamentals not changing at all as evidenced by their 40% year over year revenue growth. US investors are afraid to hold a China stock during the trade war so the company is finding potential investors who aren’t. The positive for US investors is that the Hong Kong and US stocks will trade close to one another.