A man walks past the Alibaba Group office building in Beijing, China, August 9, 2021. REUTERS/Tingshu Wang
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- Expected to add main Hong Kong listing in late 2022, maintain NYSE listing
- Hong Kong shares jump 5%; move will diversify the investor base -CEO
- Mainland Chinese investors’ access to Alibaba stock has been seen to increase
- Under the move, Ant executives are leaving the Alibaba partnership
SHANGHAI, July 26 (Reuters) – Alibaba ( 9988.HK ) will file for a primary listing in Hong Kong and maintain its listing in the United States, the first major company to take advantage of a rule change that allows Chinese high-tech companies with dual-class shares. to search dual top listings in Hong Kong.
The e-commerce giant’s move, announced 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 and scrapped an initial public offering (IPO) of its subsidiary Ant.
Alibaba shares rose 4 percent in early trading in Hong Kong as analysts said the change should give mainland Chinese investors easier access to the stock via link to the Hong Kong stock exchange known as Stock Connect. By 0303 GMT, shares were up 5% while Hong Kong’s benchmark index (.HSI) was up 1.2%.
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Already listed 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 foster a “base of ‘wider and more diversified investors’.
The move comes after the Hong Kong Stock Exchange (HKEX) in January changed its rules to allow “innovative” Chinese companies – operating an internet or other high-tech business – with rights of weighted votes or variable interest entities (VIEs) can carry out a double action. main listings of the city.
Under a VIE structure, a Chinese company creates an offshore entity for overseas listing purposes that allows foreign investors to buy shares.
“Hong Kong is also the launch pad for Alibaba’s globalization strategy, and we have full confidence in China’s economy and future,” Zhang said in a statement.
SHAKING REDUCTION
Alibaba listed on the New York Stock Exchange in September 2014, marking what was at the time the largest IPO in history.
Since 2020, the company’s share price has fallen in both markets as a heavy regulatory crackdown from 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, calling for more transparency.
While broad in scope, one of the main focuses of China’s crackdown has been regulators seeking to expand oversight of public offerings.
Last year, Chinese authorities launched an investigation into ride-hailing giant Didi Chuxing just after it incorporated in New York, citing data privacy concerns.
The company later delisted and began preparations for a listing in Hong Kong, leading analysts to interpret the investigation as driven by Beijing’s desire for data-rich companies to list at the national level.
DECOUPLING OF ANTS
Alibaba also found itself in a similar spotlight when regulators abruptly halted Ant Group’s planned $37 billion Hong Kong IPO in Shanghai in late 2020.
Coinciding with the announcement of its main dual listing, Alibaba said in its annual financial report on Tuesday that several Ant Group executives had resigned from their positions at the Alibaba Partnership, a top decision-making body for the e-commerce giant . Read more
The exits are part of an ongoing decoupling of Alibaba’s fintech division, prompted by the failed IPO. Read more
Justin Tang, head of Asia research at investment adviser United First Partners in Singapore, said Alibaba’s decision would boost Alibaba’s stock because of its possible inclusion on Stock Connect.
“In terms of other technology listings of a similar nature, this will be the playbook for companies looking to protect themselves from the regulatory risk faced by Chinese companies on US exchanges,” he said.
To switch to a dual main listing, the HKEX said companies must have a good track record of at least two full financial years listed overseas and a market capitalization of at least HK$40 billion ($5.1 billion ) or a market value of at least. at least HK$10 billion plus revenue of at least HK$1 billion in the most recent financial year.
($1 = HK$7.8493)
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Reporting by Josh Horwitz in Shanghai, Scott Murdoch in Hong Kong; Additional reporting by Anshuman Daga in Singapore; Editing by Kenneth Maxwell
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