Is Alibaba’s bond sale still happening with US ban dropped?
Alibaba shares closed higher last week, after it was reported that US authorities have decided to remove the company from a planned ban list.
- Alibaba Group’s (HKG: 9988) shares closed 2.55% higher on Friday (15 January 2021) at HK$241
- The rally came after US officials decided against imposing an investment ban on the e-commerce company
- Meanwhile, a rumoured US bond sale forecasted to raise at least US$5 billion, has been delayed
- Analysts have also expressed doubts on the sale, in light of founder Jack Ma’s recent run-in with the Chinese government
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Alibaba share price: Why did it close higher?
Alibaba Group’s American depositary shares closed 3.31% higher last Thursday (14 January 2021), after it was reported that US authorities have decided to remove the company from its investment blacklist.
Last week, senior Trump administration officials were said to be mulling an investment ban on both Alibaba and rival Tencent. If the plan had been approved, US investors would have been prohibited from trading the securities of both companies.
Shares hit an intraday peak of US$245.45, before closing at US$243 each.
Across the pacific, e-commerce conglomerate’s Hong Kong shares also closed 2.55% higher at HK$241 on Friday (15 January).
What’s the latest on the US bond sale?
Meanwhile, Alibaba’s rumoured US bond sale, which was expected to take place earlier this week, has been delayed, with prospective investors saying they have yet to receive any relevant marketing material.
Despite the shelving of the investment ban, market watchers still called into question the timing of the bond sale, with US President Elect Joe Biden’s inauguration just days away.
‘If I were the underwriter I would wait until the Biden Administration gets underway and perhaps take a more considered tone with China,’ said Geof Marshall, Head of Fixed Income at CI Global Asset Management’s Signature Global Asset Management.
It is unclear if the debt sale, initially forecasted to raise between US$5 billion and US$8 billion, would still take place. Alibaba has not provided any updates on it.
Former chairman and founder Jack Ma’s recent brushes with the Chinese government have also weakened investor confidence in the fundraising effort, with there being ‘too many unknowns’.
‘At the moment, it is not something we would participate in given the uncertainty around the actions of the Chinese regulator in this sector, Jack Ma’s recent criticism of China’s bureaucratic system and how the government will react to it,’ Alejandro Arevalo, head of EM fixed-income at Jupiter Asset Management, told Bloomberg.
Where do analysts see the stock going next?
In light of the uncertainty, Mizuho analyst James Lee lowered his Alibaba US price target on 13 January to US$270 from US$300 while maintaining a ‘buy’ rating.
He wrote that while the group enjoyed a better-than-expected December 2020 quarter thanks to successful promotions and increased adoption of its logistics business, it could face ‘disruptive competition’ from new community-buy business models.
Macquarie analyst Han Joon Kim also cut his firm's price target on Alibaba to US$387 from US$394 alongside an ‘outperform’ rating.
He trimmed his year-on-year growth estimate for gross merchandise volume and core ad-based revenue for the three months ending December 2020 from 23% to 19%.
Across the board, 23 out of 25 analysts polled by MarketBeat have rated the Alibaba US stock a ‘buy’, with one calling it ‘strong buy’ and one recommending ‘hold’.
It has also received an average 12-month target price of US$318.37. This represents an upside of 30.77% from the stock’s last traded price.
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