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China’s Alibaba will apply for a dual primary listing in Hong Kong




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

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  • Expect to add primary listing in HK by end-2022, retain NYSE listing
  • Hong Kong shares jump 5%; move will diversify investor base -CEO
  • Set to increase mainland China investor access to Alibaba shares
  • In line with the move, Ant executives are withdrawing from the Alibaba partnership

SHANGHAI, July 26 (Reuters) – Alibaba ( 9988.HK ) will file for an initial public offering in Hong Kong and retain its U.S. listing, the first major company to benefit from a rule change allowing high-tech Chinese firms with dual-class shares to seek two primary listings in Hong Kong.

The e-commerce giant’s move, announced on Tuesday, comes as both Washington and Beijing tighten scrutiny of Chinese companies’ IPOs, 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 affiliate Ant.

Alibaba’s shares jumped 4% at the start of trading in Hong Kong as analysts said the change would give mainland China investors easier access to its shares via a link to the Hong Kong exchange known as Stock Connect. At 03:03 GMT, shares were up 5% while the benchmark Hong Kong index (.HSI) was up 1.2%.

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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. CEO Daniel Zhang said the dual listing will promote a “broader and more diversified 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 or other high-tech business – with weighted voting rights or variable interest entities (VIEs) to carry out dual primary listings in town.

Under a VIE structure, a Chinese company creates an offshore entity for foreign listing purposes that allows foreign investors to buy into the stock.

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

SWEEPING STRETCH

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 declined in both markets, as a sweeping regulatory crackdown by Beijing has hit Chinese tech companies.

At the same time, American regulators have stepped up scrutiny of the accounts of Chinese firms listed in New York, and are demanding greater transparency.

Although broad in scope, a core focus 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 shortly after it went public in New York, citing privacy concerns.

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

DISCONNECTION OF ANTS

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

Coinciding with the announcement of the dual primary listing, Alibaba said in its annual financial report on Tuesday that several Ant Group executives had stepped down from their positions in the Alibaba Partnership, a top decision-making body for the e-commerce giant. read more

The departures are part of an ongoing unbundling of the fintech division from Alibaba, spurred by the botched IPO. read more

Justin Tang, head of Asia research at investment adviser United First Partners in Singapore, said Alibaba’s decision would boost Alibaba shares because of its potential inclusion in Stock Connect.

“In terms of other similar tech listings, this would be the playbook for companies looking to hedge against the regulatory risk that Chinese companies face on US exchanges,” he said.

To switch to a dual primary listing, HKEX said companies must have a good track record of at least two full financial years listed overseas, and a capitalization of at least HK$40 billion ($5.10 billion) or a market capitalization of about at least HK$10 billion plus revenues of at least HK$1 billion for the most recent financial year.

($1 = 7.8493 Hong Kong dollars)

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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

Our standards: Thomson Reuters Trust Principles.



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