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Alibaba’s Hong Kong listing surpassed other large stock sales this year, ranking ahead of Uber’s $8.1 billion IPO. Shares of the e-commerce firm closed up at $23.97 on their first day.
Shares of Chinese e-commerce giant Alibaba saw a great launch in Hong Kong on Tuesday, after pricing its shares at 176 Hong Kong dollars (approx. $22.5) apiece. This is the biggest listing this year so far, larger than the approximately $8 billion raised by Uber in May. This also came as an excellent boost for the Hong Kong market which had problems since the pro-democracy protests escalated in recent weeks. Alibaba trades under the stock code 9988 in Hong Kong. Nine and eight are considered to be lucky numbers in the Chinese culture, indicating long-lasting prosperity.
Alibaba stocks rose more than 6% at the opening and at the time of writing they were up 6.59% to HKD$187.60.
Alibaba decided to issue 500 million new ordinary shares plus 75 million so-called “greenshoe” options. This means that there is a provision in an underwriting agreement that grants the underwriter the right to sell investors more shares than initially planned by the issuer if the demand for a security issue proves higher than expected.
Tian Hou, founder and CEO of T.H. Capital called Alibaba’s Hong Kong listing “pretty successful” adding:
“Given time, we do believe the stock price is going to appreciate more. If we put another 10-year time frame, another five to six times appreciation is doable.”
In his letter to the investors Daniel Zhang, CEO and chairman of Alibaba wrote:
“When Alibaba Group went public in 2014 , we missed out on Hong Kong with regret. Hong Kong is one of the world’s most important financial centers. Over the last few years, there have been many encouraging reforms in Hong Kong’s capital market. During this time of ongoing change, we continue to believe that the future of Hong Kong remains bright. We hope we can contribute, in our small way, and participate in the future of Hong Kong.”
Mary Manning, portfolio manager at Ellerston Capital commented that it was always very strange that the largest Chinese company was listed exclusively in the U.S.
Hong Kong Stock Exchange hasn’t seen one corporation raising so much (approximately $11 billion) since 2010. The stocks of Alibaba had been already listed in New York and with this listing, it will be easier for mainland investors to trade with it as well. Also, it comes as a great boost to the exchange that just saw its biggest profit fall in more than three years following a failed bid to buy its London counterpart in September.
However, this Alibaba move could be predicted already five years ago when the company had its debut on NYSE and decided to hold its $25 billion initial public offering. Also, its co-founder Jack Ma always wanted to take listing closer to home and, since the U.S.-China trade war started, it’s been hard, even for him to sustain growth.
Be it as it may, the new funds are helping Alibaba finance a war against homegrown rivals (Tencent as the main rival) and analysts predict that it could make cash reserves of around $44 billion.