What’s Going On Here?

Alibaba completed its share sale in Hong Kong, revealing $11 billion in hidden riches.

What Does This Mean?

• Alibaba is actually already a public company: it raised a record $25 billion by selling shares in 2014. But it did so in New York rather than in the East because the Hong Kong Stock Exchange’s rules banned companies from going public with “dual-class share structures” – the kind that’s popular among tech companies.

A dual-class stock structure means that a company has more than one class of stocks, and every class has different voting rights, dividend payments, …

• But a recent relaxation of those rules in Hong Kong has lured Alibaba closer to home, which now gives its investors the choice between its US or Hong Kong-listed stock.
• The company’s share sale was the biggest of 2019 so far, and Hong Kong’s biggest since 2010 – meaning the exchange may end the year as the world’s most popular stock listing location.

Why Should I Care?

For markets: Confidence despite disruptions.

• Investors’ appetite for Alibaba’s new shares initially pushed their value up, which might’ve surprised those who’ve been distracted by the escalation of local protests.
• It’s fair to say Alibaba didn’t really need the cash:
  • it’ll now have around $44 billion in its coffers, some of which it’ll spend on growing and better engaging its user base.

The bigger win might actually be the diversification of the company’s shareholders away from predominantly American investors and toward local Chinese investors.

Zooming out: Alibaba suddenly looks small.

The world’s biggest IPO of the year is set to be that of Saudi Aramco, and it said there’s enough demand among Middle Eastern investors for the $25 billion of stock.

Content source: Finimize. (2019) Rally Baba. Available from: https://www.finimize.com/wp/news/rally-baba/ [Accessed 21 November, 2019]