Alibaba has a US$15B dilemma

WHEN TO LIST?

HONG KONG • Hong Kong’s political unrest is posing a dilemma for Alibaba Group Holding Ltd on the timing of its planned US$15 billion listing in the city, with sources saying China’s biggest e-commerce company is now considering several timetables.

New York-listed Alibaba was most likely to launch the offer — potentially the world’s biggest of the year — as early as the third quarter, sources have said, and late August, after its first-quarter earnings, was widely viewed as the most likely window.

In preparation for the offer, bankers advising other large listings in Hong Kong have been careful to avoid planning their launches around that period, fearing that a clash of timing would crowd out their offerings. But not a word was mentioned by Alibaba on the Hong Kong listing when it released estimate-beating earnings on Thursday nor did the offer come up in the hour-long discussion with analysts after the results.

Two sources involved in the deal and one other briefed on Alibaba’s discussions described the company’s thinking on the deal as “fluid” and said Alibaba was considering several timetables. Alibaba declined to comment.

The Hong Kong listing deal was estimated at up to US$20 billion, but is more likely, according to sources close to the deal, to raise between US$10-US$15 billion.

The listing was always expected to be a complex affair because of China’s tight control of cross-border share trading, but Hong Kong’s unrest has taken the complexity several notches higher.

More than 10 weeks of confrontations between police and pro-democracy protesters have plunged Hong Kong into its worst crisis since it returned to Chinese rule in 1997 and presented President Xi Jinping with his biggest popular challenge since taking power in 2012.

Under the circumstances, when Alibaba lists becomes crucial as it sends a signal to the world on the state of Hong Kong as a business and financial centre and provides a window into China’s reading of the situation.

“How do you think Beijing feels about giving Hong Kong a US$15 billion gift like this, right now?” asked one capital markets professional not involved in the Alibaba deal.

A listing by Alibaba is a big deal for Hong Kong, which loosened its rules last year specifically to lure overseas-listed Chinese tech giants to list closer to home.

Alibaba would be the first to test the new system.

Asked this week whether Hong Kong’s turmoil would affect its listing, Hong Kong stock exchange chief executive Charles Li avoided directly acknowledging the company’s application, which is still technically confidential.

But Li added: “I am confident that companies like that ultimately will find a home here, because this is home and I think they will come. I don’t know when though.”

Reuters