Alibaba aims to add main listing in Hong Kong and woo Chinese investors after crackdown

A man walks past the Alibaba Group office building in Beijing, China August 9, 2021. REUTERS/Tingshu Wang

Join now for FREE unlimited access to Reuters.com

Register

  • Plans to add HK main listing by end of 2022, retain NYSE listing
  • Hong Kong shares jump almost 6%; this decision will diversify the investor base -CEO
  • Seen boosting mainland China investors’ access to Alibaba shares
  • In line with move, Ant Group executives withdraw from partnership with Alibaba

SHANGHAI, July 26 (Reuters) – Alibaba (9988.HK) plans to add a primary Hong Kong listing to its New York presence, targeting investors in mainland China as it becomes the first major company to take advantage of a rule change in the financial center to attract Chinese high-tech companies.

The e-commerce giant’s decision, announced on Tuesday, comes as Washington and Beijing step up scrutiny of Chinese companies’ listings, and after a devastating regulatory crackdown in China left Alibaba with a $2.8 billion fine. dollars and canceled an initial public offering (IPO) of its subsidiary Ant Group.

It also comes amid an audit dispute between China and the United States, which threatens to evict hundreds of Chinese companies listed in New York.

Join now for FREE unlimited access to Reuters.com

Register

Analysts said the change should give mainland Chinese investors easier access to stocks through a link to the Hong Kong stock exchange known as Stock Connect. As of 0358 GMT, shares were up 5.9% while the benchmark Hong Kong index (.HSI) was up 1.5%.

“Being in Stock Connect means it will be more convenient for mainland Chinese investors to eventually buy the stock, so investors are happy to step in today and buy the stock in Hong Kong,” said Louis Tse, managing director of Wealthy Securities.

Already present 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 Daniel Zhang said the dual listing would promote a “wider and more diverse investor base”.

The move comes after the Hong Kong Stock Exchange (HKEX) changed its rules in January to allow “innovative” Chinese companies – operating an internet business or other high-tech business – with weighted voting rights or entities to Variable Rights Holders (VIEs) to exercise dual principal registrations in the city.

Under a VIE structure, a Chinese company sets up an offshore entity for overseas listing purposes that allows foreign investors to purchase shares.

“Hong Kong is also the launching pad for Alibaba’s globalization strategy, and we have full confidence in China’s economy and future,” Alibaba CEO Zhang said in a statement.

RAPID REPRESSION

Alibaba went public on the New York Stock Exchange in September 2014, marking what was at the time the biggest IPO in history.

Since 2020, the company’s share price has fallen in both markets, as a sweeping regulatory crackdown by Beijing has hit Chinese tech companies.

At the same time, US regulators have stepped up scrutiny of the accounts of Chinese companies listed in New York, demanding greater transparency.

Although wide-ranging, the Chinese crackdown has focused on regulators seeking to expand oversight of public offerings.

Last year, Chinese authorities launched an investigation into ride-hailing giant Didi Global just after it listed in New York, citing data privacy concerns.

The company was later delisted and began preparations to list in Hong Kong, leading analysts to interpret the investigation as being driven by Beijing’s desire for data-rich companies to list domestically. .

ANT GROUP DECOUPLING

Alibaba also found itself in the same crosshairs when regulators abruptly halted Ant Group’s planned $37 billion IPO in Hong Kong and Shanghai in late 2020.

Along with announcing its dual primary listing, Alibaba said in its annual financial report on Tuesday that several Ant Group executives had resigned from their roles at the Alibaba Partnership, one of the e-commerce giant’s key decision-making bodies. . Read more

The departures are part of an ongoing decoupling of Alibaba’s fintech division, spurred by the botched IPO. Read more

Justin Tang, head of Asian research at investment adviser United First Partners in Singapore, said Alibaba’s move would boost the company’s shares due to its potential inclusion in Stock Connect.

“As for other similar tech listings, this will be the playbook 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, the HKEX said companies must have a good track record of at least two full years listed overseas, and a market capitalization of at least HK$40 billion (5.10 billion). dollars) or a market value of at least HK$10 billion plus a turnover of at least HK$1 billion for the most recent financial year.

($1 = HK$7.8493)

Join now for FREE unlimited access to Reuters.com

Register

Reporting by Josh Horwitz in Shanghai and Scott Murdoch in Hong Kong; Additional reporting by Anshuman Daga in Singapore; Editing by Kenneth Maxwell

Our standards: The Thomson Reuters Trust Principles.

Robert D. Coleman