Alibaba is looking for a dual-primary listing in Hong Kong
27 July 2022
Alibaba said on Tuesday that it will seek a dual-primary listing in Hong Kong, potentially giving it access to China’s vast pool of investors, as mainland officials indicate that a long-running crackdown on the technology sector may be coming to an end.
The move also comes as Chinese technology firms listed in New York become increasingly concerned about a regulatory crackdown by US authorities amid simmering tensions between the two superpowers.
While Alibaba has a secondary listing in Hong Kong, it is not eligible to participate in the city’s popular Stock Connect program, which connects bourses in Shanghai and Shenzhen.
That door would be opened by the dual-primary listing, which is expected before the end of the year.
The news of the plan sent Alibaba shares up more than 5% on Tuesday, boosting other tech firms and helping to lift the broader Hang Seng Index.
Fears in Beijing that massive internet companies control too much data and have expanded too quickly have fueled the campaign.
However, officials appear to be easing up as they deal with a slowing economy. In May, Chinese Premier Li Keqiang urged support for tech firms to list both domestically and internationally.
However, there is still a strict regulatory environment: Chinese President Xi Jinping recently called for increased oversight and security in the financial technology sector.
On Tuesday, Alibaba Chairman and CEO Daniel Zhang stated that the primary listing aimed to foster “a wider and more diverse investor base to share in Alibaba’s growth and future, particularly from China and other Asian markets.”
“Hong Kong is also the starting point for Alibaba’s globalization strategy, and we have complete faith in China’s economy and future,” he added.
In the first six months of 2022, Alibaba reported an average daily trading volume of $3.2 billion in the United States, while its Hong Kong secondary listing saw about $700 million.
Stock Connect enables firms to access liquidity from mainland China for easier financing and higher valuations, but they must conduct the majority of their annual trading in the Chinese finance hub to qualify.
Didi, a ride-hailing company, will be fined more than $1 billion.
Following a rule change by the bourse in January, Alibaba is among a group of “innovative” Chinese firms with weighted voting rights or variable interest entities that would be eligible for dual-primary listing in Hong Kong.
According to Forsyth Barr Asia analyst Willer Chen, the move would be “massive” for Alibaba, and inclusion in Stock Connect could lead to a “more diversified investor base.”
Beijing has objected to an attempt by US regulators to inspect the audit papers of Chinese firms listed there, and Alibaba is one of 250 companies that could be removed if an agreement is not reached.
Stocks of Alibaba and Tencent have fallen as a result of fines.
Domestically, Alibaba is still reeling from the tech crackdown, as well as China’s slowing economy as a result of the Covid-19 restrictions.
Last year, the company was fined a record $2.75 billion for alleged unfair practices, and its financial arm Ant Group’s planned 2020 initial public offering — which would have been the world’s largest public offering at the time — was canceled at the last minute.
