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With the IPO move in full force, the logistics arm of Alibaba is looking forward to raising between $1 billion and $2 billion.
Cainiao Network Technology, the logistics arm of online marketplace Alibaba (NYSE: BABA), is seeking an initial public offering (IPO) in Hong Kong early next year. In the post-hours trading session, Alibaba stock trades up 0.44% to $83.59 on the New York Stock Exchange (NYSE).
The IPO plan for the logistics business kick-started after Alibaba revealed in March that it would split its business into six units. The Group would consider raising capital or going public to gather funds for future developments. The logistics operations IPO will be the first of Alibaba’s spun-off units.
Alibaba Logistics Arm Eyes Up to $2B IPO
According to three people familiar with Alibaba, with the IPO move in full force, the logistics arm is looking forward to raising between $1 billion and $2 billion. In addition, two of the sources noted the scheduled time for the coming market debut. However, they warned that the plans are still liable to change as decisions are not finalized.
Except for the recent gains, Alibaba’s shares have declined for the past year. After losing almost 2% in the last twelve months, the Group also dropped 5.53% since January. It also fell 21.08% and 18.04% over the past month. In the last five days, BABA has fallen 1.12%.
Over the past years, Alibaba has picked up stakes in express delivery giants for reliable services for the Group. The Group, as well as other partners, founded Cainiao in 2013. Some of the partners include Fosun Group, Intimate Group, and more logistics firms. Four years later, Alibaba took control of the logistics business, moving its stake from 47% to 67%.
As for Cainiao, the business has been running successfully over time, amassing gains. The company, which provides software and shares data with logistics firms, carriers, and warehouses, posted 42 billion yuan ($6.07 billion) in revenue in the nine months ended in December. Notably, the figures represented a 22% jump YoY. Also, it was 6% of the Group’s total revenue for the period.
According to analysts, Alibaba’s decision to slip its business into six units could ease scrutiny over the empire. In addition to Cainiao, the other five units are Global Digital Commerce, Digital Media and Entertainment, Taobao Tmall Commerce, Local Services, and Cloud Intelligence. The Group had said that each of these six units will have its CEO and board of directors, while Daniel Zhang continues to be the chairman and CEO of Alibaba Group.