Chinese e-commerce giant Alibaba Group is poised to launch a Hong Kong share sale expected to raise up to $13.4 billion as soon as Thursday, according to two sources with knowledge of the discussions.
The deal - which would be the world's biggest cross-border secondary listing - will be seen as a boost for Hong Kong, which has sunk into its first recession in a decade as more than five months of street protests and worries about the US-China trade war took their toll.
While Alibaba executives are preparing for a Thursday launch, another source said the timing could slip depending on developments in the protests.
All three sources declined to be identified because the information was not yet public. An Alibaba spokeswoman declined to comment on the company's listing plans.
It had been planning to sell the shares earlier this year but in August postponed the deal as the anti-government protests rocking the city since June became increasingly violent.
The third source said Alibaba was confident that the company could overcome the negative sentiment in Hong Kong financial markets caused by the demonstrations.
The deal had been initially expected to raise up to $15 billion, but the source said the company would sell up to 500 million primary shares in the listing.
Including a typical "greenshoe", or overallotment option, to sell some extra shares, the sale could raise up to $13.4 billion.
A sale of that size will dilute existing shareholders by 2.8% and investors will be able trade shares between the two exchanges, the source said.
Alibaba will lodge its US regulatory filings and publish a preliminary prospectus for the deal on Wednesday evening on the Hong Kong Stock Exchange website.
Its Hong Kong shares are expected to be offered at a discount of up to 5% of the US equivalent.
At $13.4 billion, Alibaba’s share sale would be the city’s largest in more than nine years, and would rank as the world’s largest follow-on share sale targeting an entirely new stock exchange, according to data from Dealogic.
Alibaba holds the world record for an initial public offering with its 2014 $25 billion New York float, but could shortly lose the crown to Saudi Arabia’s Aramco. The oil producer is expected to raise between $20 billion to $40 billion in an IPO expected to price in the coming weeks.
Singles Day Slowdown
Alibaba has not yet said what it plans to do with the new funds. However, the company has been looking to expand its Chinese customer base beyond its core market in big cities to less developed areas to combat slowing retail sales growth.
On Monday, the e-commerce juggernaut reported a record $38.4 billion in sales from its annual 24-hour Singles Day shopping blitz, but growth in the closely watched number slowed to 26%, its slowest since the event began in 2009.
Alibaba had hoped to use the online sales fest to tee up the Hong Kong listing, according to sources with knowledge of the deal plans. But Alibaba’s shares in New York ended down 0.24% on Monday, slightly underperforming the wider market.
So far this year however, its New York shares have risen 36.4%. Hong Kong's blue-chip Hang Seng Index is 2.6% higher for the year.
Alibaba has, however, been working to ensure the deal’s success in other ways, having chosen the stock code 9988, according to the two sources. For Chinese speakers that combines two of the luckiest numbers, together symbolising long-lasting prosperity - particularly when spoken in Cantonese, the language spoken by most in Hong Kong.
The number also plays on the company’s existing US stock code “BABA” which sounds like saying “88” in Mandarin.
China’s CICC and Credit Suisse are leading the deal. Last week Alibaba added Citigroup JPMorgan and Morgan Stanley to that list and more banks are expected to join the syndicate.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.