Alibaba, the Chinese online shopping giant, said on Tuesday it would seek a primary listing in Hong Kong, a move that would eventually allow more people in mainland China to invest in it, and give it a buffer in case it fails. would be forced to come off the stock market. in the United States due to regulatory concerns.
The listing is the latest signal that Chinese companies are looking for ways to mitigate risk as they come under pressure from regulators on both sides of the Pacific. It also shows how the one-time love affair between Chinese tech companies and Wall Street is coming to an end.
Over the past two years, Chinese companies seeking capital in the United States have struggled amid a wide-ranging crackdown by Chinese regulators against Big Tech. Alibaba’s financial subsidiary, Ant Group, has canceled a blockbuster listing in the United States at the last minute at the behest of Chinese regulators. A separate investigation into the ride-hailing company Didi led it to withdraw its shares just six months after a New York stock exchange.
At the same time, regulators in the United States have been working to enforce Trump-era rules that require better control disclosures. The Chinese government has insisted that much of the information, especially sensitive data collected by internet companies, should not be shared abroad. While talks between US and Chinese regulators are ongoing, the disagreements could lead to the delisting of hundreds of Chinese companies.
For Alibaba, the new Hong Kong listing arrangement provides the company with a safety net against such risks. It also boosts the business by making it more accessible to millions of Chinese merchants, who until now had limited opportunities to buy stock in a company they shop at every day. Shares of Alibaba rose more than 5 percent in Tuesday morning trading in Hong Kong on the listing news.
July 25, 2022, 8:26 PM ET
Although Alibaba already traded in Hong Kong, the new listing process will help it benefit from a program linking the Hong Kong stock exchange with those in China. Alibaba said in a filing that it expects to complete the process by the end of the year.
“Hong Kong is also the launch pad for Alibaba’s globalization strategy,” the company’s CEO Daniel Zhang said in a statement. He added that the new listing would “promote a broader and more diversified investor base to share in Alibaba’s growth and future, especially from China and other markets in Asia.”
The dual listing marks a significant shift from less than a decade ago, when Alibaba made the world’s largest IPO by selling its shares in New York in 2014. At the time, the company was the emblem of a fast-growing and rapidly innovating Chinese technology sector that seemed to be taking the world by storm.
But since 2020, Alibaba’s share price has more than halved due to crackdowns by Chinese regulators and crackdowns on Covid that have hurt domestic spending. The Chinese government has imposed a series of hefty fines on the country’s largest internet companies. Alibaba was ordered to pay $2.8 billion for antitrust violations in 2021; Last week, Didi, the ride-hailing giant, was charged $1.2 billion.
Analysts have said regulators could ease pressure on Chinese internet companies to fuel weakening economic growth. But many view Beijing’s tightened grip on Big Tech as a feature that’s here to stay.