Reuters cited two unnamed sources in a report Wednesday on the decision to postpone. One said that the delay was approved at a board meeting the weekend before last week’s financial results announcement. The source said that had the listing gone ahead, it would have irked the Chinese government in Beijing.
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The source said that the company is now looking at an October launch date.
Alibaba has its primary share listing on the New York Stock Exchange and, with shares quoted at more than $177 apiece, it is valued at $460 billion. The planned listing in Hong Kong would have been a secondary listing that added to the company’s coffers and brought it closer to its core operations in mainland China. Commentators have suggested that Alibaba could raise $10 billion to $15 billion of fresh capital from a Hong Kong share sale, though the company has not confirmed any particular fundraising target.
Sources close to the company point to other advantages from listing in Hong Kong, not least of which would be access to the shares for mainland Chinese investors through the so-called stock connect system between Hong Kong’s and China’s stock exchanges. A Hong Kong listing could also mitigate a degree of political risk if U.S. investors turn hostile to Chinese companies, and if an escalation of the U.S.-China trade war leads to restrictions on Chinese companies accessing U.S. capital markets.
In the five years since Alibaba launched its IPO in New York, the Hong Kong Stock Exchange has changed its rules to allow the trading of shares such as Alibaba’s which have restricted voting rights. The company has approved an eight-for-one share split that would make its stock easier to trade in Hong Kong.
It’s therefore an ironic twist that the current political troubles in Hong Kong appears to have delayed Alibaba’s listing plans there. It has not yet filed a prospectus in Hong Kong.
The city – a special administrative region of China after its handover back to the mainland from Britain in 1997 – has endured more than two months of pro-democracy and anti-police brutality protests, which at times have turned violent. The protests started with public anger against the Hong Kong government’s proposed extradition bill, but have since become a broader movement against heavy-handed police tactics and what many say is the rapid erosion of the large degree of autonomy that was supposed to have guaranteed Hong Kong’s way of life for 50 years following the handover.
Alibaba recently announced strong profit and revenue growth for the second quarter of its financial year. In the April-to-June period, revenues were up by 42% to $16.7 billion. Earnings per share were $1.83, compared with analysts’ estimates of $1.50. Alibaba Pictures Group, which spans some of the group’s entertainment businesses, already has a separate share listing in Hong Kong and Singapore.