Alibaba share price: Where next after huge Hong Kong IPO?
Alibaba raised an estimated US$11.3 billion in its debut on the Hong Kong bourse, the largest IPO in the city this year. What are the next steps for the company?
The streets of Hong Kong might be quiet in the aftermath of demonstrations, but that hasn’t stopped Chinese internet behemoth Alibaba from having the most resounding of homecoming parties.
On Wednesday (November 26), Alibaba Group Holding Limited (HK)'s much-anticipated listing on the Hong Kong Stock Exchange (HKEX) finally launched, rallying 6.6% to close the trading day at HK$187.60, above the opening price of HK$176.
Alibaba, Asia’s largest publicly traded company by market capitalisation, raised an estimated US$11.3 billion on day one of proceedings. It is Hong Kong’s largest flotation this year, surpassing Uber Technologies Inc (All Sessions)'s US$8.1 billion IPO in May.
The number, which is in line with initial estimates, could still move north into the region of US$13 billion, if Alibaba decides to utilise an over-allotment option in the next 30 days.
The company’s primary listing on the New York Stock Exchange, where shares are fungible with the Hong Kong-listed shares, also hit a six-month peak closing price of US$194.05, to end an already profitable day on a high.
Alibaba Hong Kong IPO: Taking stock
With the Hong Kong debut going according to plan, Group Chairman and CEO Daniel Zhang said the listing has allowed the company to achieve its long-time goal of returning home.
‘I want to especially thank Hong Kong and the Hong Kong Stock Exchange. As a result of the continuous innovation and changes to the Hong Kong capital market, we are able to realise what we regrettably missed out on five years ago.
‘Today, we realised what we said then: When conditions allow, we will come back to Hong Kong,’ Zhang said in a speech delivered at the HKEX.
Alibaba’s decision to go forward with the IPO surprised many initially, but as Andrew Sullivan, a director at Pearl Bridge Partners, told Bloomberg Television a couple of hours into trading, that this was more of a ‘symbolic’ listing.
‘This is a representation of Alibaba coming back to Hong Kong. They don’t need the money,’ said Sullivan. ‘Coming at this time just after the protests, it underlines that the Hong Kong market is working regardless of what you see outside on the streets.’
Dickie Wong, head of research at broker Kingston Securities, told The Financial Times that the launch was ‘slightly better than expected’, but still ‘definitely a must-have stock for the portfolio of a local investor’.
First day stock take-up rate appeared to reflect this sentiment, as small retail investors took 10% of all shares, after having subscribed 40 times the number of shares allotted.
Next steps for the company
Alibaba said in its prospectus for the IPO that it plans to inject the capital into the further development of its subsidiary platforms, including video streaming site Youku, food delivery service Ele.me, and online travel agency Fliggy.
It will also allocate funds into the research and development of its cloud computing, entertainment, logistics, as well as physical retail business pillars.
For Alibaba, the listing also gives the company more resources to compete with two of its biggest rivals, fellow technology companies Tencent and Baidu.
As it stands, Tencent’s Hong Kong-listed shares fell by 1.0% on the same day of Alibaba’s HKEX premiere. Tencent shares have historically been sold at a higher price than Alibaba shares. As at Wednesday 27 November 2PM Hong Kong time, Tencent shares were priced at HK$334.60 apiece.
Baidu share price also fell US$1.72 to open Tuesday 26 November’s market.
It remains to be seen how the listing prices of all three companies will fare in the coming months. Alibaba, Tencent, and Baidu are among the top ten largest internet companies in the world, and each has a market capitalisation of US$520.50 billion, US$410.60 billion, and US$41.34 billion respectively.
For now, Alibaba hopes to create 100 million jobs over time. In the next five years, it aims to serve over one billion annual active consumers and achieve over RMB10 trillion in annual gross merchandise volume through its China consumer business. Zhang stated in the same speech that the listing establishes a solid foundation for the achievement of these goals.
‘We are also grateful for being part of this era, which is driven by digital innovation. Through the development of the internet and digital economy, we have been granted the opportunity to fulfil our founding mission, “to make it easy to do business anywhere.” We want to use digital technology to help our customers and partners embrace the era of the digital economy,’ said Zhang.
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