A man walks past the Alibaba Group office building in Beijing, China, August 9, 2021. REUTERS/Tingshu Wang
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- Expects to add primary HK listing by end of 2022, maintain NYSE listing
- Hong Kong shares jumped 5%; the move will diversify the investor base – ex
- Mainland Chinese investors are seeing increased access to Alibaba shares
- In line with the move, Ant’s executives are stepping down from the Alibaba partnership
SHANGHAI, July 26 (Reuters) – Alibaba ( 9988.HK ) will apply for an initial listing in Hong Kong and retain its U.S. listing, the first major company to benefit from a rule change allowing high-tech Chinese firms to hold dual share class to seek dual primary listings in Hong Kong.
The e-commerce giant’s move, announced on Tuesday, comes as Washington and Beijing tighten controls on listings of Chinese companies and after a devastating regulatory crackdown in China left Alibaba with a $2.8 billion fine and failed initial public offering (IPO ) of its affiliate Ant.
Alibaba shares jumped 4 percent in early Hong Kong trading as analysts said the change should give mainland Chinese investors easier access to the stock through a link to the Hong Kong exchange known as Stock Connect. By 0303 GMT, shares were up 5 percent, while Hong Kong’s benchmark ( .HSI ) was up 1.2 percent.
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Already listed on the Hong Kong Stock Exchange with a secondary listing since 2019, Alibaba said it expects the primary listing to be completed by the end of 2022. Chief Executive Officer Daniel Zhang said the dual listing will promote “a broader and more diversified investor base’.
The move comes after the Hong Kong Stock Exchange (HKEX) in January changed its rules to allow “innovative” Chinese companies – operating internet or other high-tech businesses – with weighted voting rights or variable interest enterprises (VIEs) to dual primary listings in the city.
Under a VIE structure, a Chinese company creates an offshore company for overseas listing purposes that allows foreign investors to buy shares.
“Hong Kong is also the launch pad for Alibaba’s globalization strategy, and we have full confidence in China’s economy and future,” Zhang, Alibaba’s chief executive, said in a statement.
A SWEEPING RESULT
Alibaba listed on the New York Stock Exchange in September 2014, marking what was at the time the largest IPO in history.
Since 2020, the company’s share price has declined in both markets as Beijing’s sweeping regulatory crackdown has hit Chinese tech companies.
At the same time, US regulators have stepped up scrutiny of the accounts of Chinese firms registered in New York, demanding greater transparency.
While broad in scope, the main focus of the crackdown in China has been regulators seeking to expand oversight of public offerings.
Last year, Chinese authorities launched an investigation into ride-hailing giant Didi Chuxing as soon as it registered in New York, citing data privacy concerns.
The company later delisted and began preparations for a Hong Kong listing, prompting analysts to interpret the investigation as driven by Beijing’s desire for data-rich companies to list on the domestic market.
DISSOLUTION OF ANTS
Alibaba also found itself in a similar crosshairs when regulators abruptly halted Ant Group’s planned $37 billion Hong Kong IPO in Shanghai in late 2020.
Coinciding with the announcement of its dual initial public offering, Alibaba said on Tuesday in its annual financial report that several Ant Group executives had stepped down from their posts at the Alibaba Partnership, a top decision-making body for the e-commerce giant. Read more
The departures are part of the ongoing spin-off of the fintech division from Alibaba, prompted by the failed IPO. Read more
Justin Tang, head of Asia research at investment adviser United First Partners in Singapore, said Alibaba’s decision would boost Alibaba’s shares because of its potential listing on Stock Connect.
“In terms of other similar technology listings, this will be the book for companies looking to hedge against the regulatory risk that Chinese companies face on US exchanges,” he said.
To move to a dual primary listing, HKEX said companies must have good performance from at least two full financial years listed overseas and a capitalization of at least HK$40 billion ($5.10 billion) or a market value of at least 10 HK$ billion plus revenue of at least HK$1 billion for the last financial year.
($1 = HK$7.8493)
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Reporting by Josh Horwitz in Shanghai, Scott Murdoch in Hong Kong; Additional reporting by Anshuman Daga in Singapore; Editing by Kenneth Maxwell
Our standards: The Thomson Reuters Trust Principles.
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