Alibaba revealed a strategy to increase mainland Chinese investors’ access to the shares.
The Chinese internet giant announced in a statement on Tuesday that its board has approved a request to upgrade its Hong Kong shares to a principal listing, which it anticipates will happen by the end of this year.
Since a significant initial public offering in 2014, Alibaba (BABA) has already had a primary listing in New York, where its shares have been traded on the NYSE. Once the change is complete, the company will continue operating there and hold dual primary listings, it said.
Since 2019, when it joined the spate of Chinese corporations having what were perceived as “homecoming parades from Wall Street,” the company has had a secondary listing in Hong Kong.
Alibaba’s shares rose 5% on Tuesday in premarket activity in New York and Hong Kong following news of the most recent IPO.
The decision was made, according to the company’s statement from Chairman and CEO Daniel Zhang, “in the hopes of fostering a wider and more diversified investor base to share in Alibaba’s growth and future, especially from China and other markets in Asia.”
Alibaba has suffered greatly since becoming a target of China’s extensive crackdown on the country’s once-booming technology industry. The company’s shares have been declining ever since, dropping 49 percent of their value in both New York and Hong Kong markets last year. This year, pressure has continued to be placed on its stocks in each location.
Stephen Innes, managing partner of SPI Asset Management, believes that the improved listing will lessen some of the pressure.
He mentioned the Stock Connect programme, which enables investors in mainland China and Hong Kong to transact in shares across the border, in a report to clients on Tuesday, noting that “the listing will allow Alibaba to seek inclusion in the Stock Connect links with the Shanghai and Shenzhen exchanges.”
After a year-long selloff brought on by China’s economic slowdown and Beijing’s crackdown on the country’s most influential internet firms, this might increase [Alibaba’s] liquidity, according to Innes.
Since the failed 2020 IPO of its fintech subsidiary, Ant Group, which would have been the largest in history, Alibaba has come under increased scrutiny.
The massive 18.2 billion yuan ($2.8 billion) penalties was imposed on the e-commerce behemoth last year after regulators accused it of acting monopolistically.
However, after a catastrophic collapse, investors had been anticipating that China’s crackdown will end this year. The country’s IT stocks rose in April after Chinese state media revealed that the administration had promised to support the “healthy development” of the industry.