Chinese e-commerce giant Alibaba Group Holding Ltd. raised up to US$12.9-billion in a landmark listing in Hong Kong, the largest share sale in the city in nine years and a world record for a cross-border secondary share sale.
The deal will be seen as a boost to Hong Kong after more than five months of anti-government protests and its recent slide into its first recession in a decade.
Alibaba said in a statement it had priced the shares at 176 Hong Kong dollars (US$22.49) each, a discount of 2.9 per cent to its New York closing price, confirming information earlier reported by Reuters.
The price means Alibaba will raise at least 88-billion Hong Kong dollars – a symbolic total because the number eight is associated with prosperity and good fortune in Chinese culture.
Alibaba has also chosen the stock code 9988 for its listing, which for Chinese speakers combines two of the luckiest numbers, together symbolizing long-lasting prosperity.
The total raised from the deal could eventually reach US$12.9-billion if a so-called “greenshoe” over-allotment option were exercised.
Alibaba shares closed in New York on Tuesday at $185.25. One of Alibaba’s New York-listed American Depositary Shares (ADS) is worth eight of its Hong Kong shares.
While the discount to Alibaba’s last close was set at 2.9 per cent, analysts noted the price represented a 3.7-per-cent discount to Alibaba’s share price on Nov. 12 – the day before the deal was launched.
“I was expecting it to be done at around 4 per cent-5 per cent so this is about right,” said Sumeet Singh, head of research at Aequitas and who publishes on research website SmartKarma. “The deal represents just about 4.4 days of three-month average daily value traded and hence, relatively it’s not a big deal for a stock of Alibaba’s size.”
Alibaba’s deal comes amid a late-year rush of share sales, with Saudi Arabia’s state oil giant Aramco revving up to price an initial public offering so large it threatens to eclipse Alibaba’s own record US$25-billion float in 2014.
A deal at the top of Aramco’s price range would raise US$25.6-billion and value the company at US$1.7-trillion – short of the US$2-trillion it had originally sought.
HONG KONG BOOST
Hong Kong’s army of small investors have welcomed the Alibaba deal, subscribing for 40 times the shares they were originally allotted, according to two sources with direct knowledge of the deal.
That represents the heaviest oversubscription rate for any multibillion dollar share sale in Hong Kong in more than four years, according to Dealogic data.
Alibaba declined to comment on retail subscriptions.
Retail investors will now take 10 per cent of the deal, up from the 2.5 per cent they were originally allotted. Hong Kong operates a “clawback” system where heavy oversubscription from small investors can result in them getting a greater share.
The numbers imply retail investors collectively put up about US$11-billion in the hope of getting shares in the Chinese e-commerce champion.
A float by Alibaba is seen as particularly significant to Hong Kong since it lost the company’s IPO to New York in 2013 because the Asian financial hub would not then accept its unusual governance, where a self-selecting group of insiders control the majority of board seats.
That decision ultimately resulted in Hong Kong rule changes last year that have allowed Alibaba to conduct this listing.
Bankers hope other U.S.-listed Chinese tech giants will follow suit.
Alibaba’s listing ceremony is set to be held at the Hong Kong Stock Exchange next Tuesday and the event will be closely watched given the continuing protests unfolding across the city.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.