Alibaba Group Holding, operator of the world's largest e-commerce platform, has applied to split its ordinary shares, part of a move to increase the flexibility of its capital raising activities, including the issuing of new shares.
The New York-listed Chinese e-commerce giant is proposing to split each of its ordinary shares into eight, according to a stock exchange filing. Under the changes, one American Depositary Share (ADS), which currently represents one ordinary share, will represent eight ordinary shares. Voting rights of shareholders will remain the same.
"The board of directors is proposing the share subdivision to increase the flexibility for the company in future capital market activities," said the company, which owns South China Morning Post, in its filing. "Among other reasons, the one-to-eight share subdivision will increase the number of shares available for issuance at a lower per-share price, and the board of directors believes that this will increase flexibility in the company's capital raising activities, including the issuance of new shares."
The move comes after speculation the e-commerce firm has filed for a Hong Kong listing, which could raise as much as US$20 billion in what would be the city's largest IPO, according to Bloomberg which cited people familiar with the matter. It said the company has picked China International Capital Corporation and Credit Suisse Group as its lead banks.
Alibaba reiterated that it does not comment on market rumours. Hong Kong Exchanges & Clearing Limited (HKEX), the operator of Asia's second-largest capital market, declined to comment.
As of June 7, Alibaba had 4 billion ordinary shares valued at US$0.000025 each, forming a US$100,000 share capital. The share split would raise the number of shares to 32 billion at a par value of US$0.000003125 each. The company's shareholders will vote for the changes at the annual general meeting on July 15 in Hong Kong. If approved, the change has a year to come into effect.
The Hangzhou-based company raised US$25 billion in its initial public offering in New York in 2014, marking the world's largest flotation in history. Despite wanting to file in Hong Kong, the e-commerce giant turned to the US after growing frustrated at the city's listing rules.
The HKEX had insisted Alibaba's dual-class share structure meant ordinary investors were at a disadvantage, as founders or key management hold larger voting rights.
In a blog post at the time, vice-chairman Joe Tsai wrote that "the question Hong Kong must address is whether it is ready to look forward as the rest of the world passes it by".
But in April last year the HKEX reformed its rules to allow dual-class share companies to list in the city, in an attempt to draw tech companies, particularly those from China, to its markets. The change attracted the likes of smartphone maker Xiaomi, which raised US$5.4 billion last July, and food delivery service app Meituan Dianping, which raised US$4.2 billion in September, and made Hong Kong the world's top IPO market in 2018.
Mainland China also wants to attract tech companies and officially launched its new Shanghai tech board on Thursday. So far, 120 companies have applied to list on the board.
Called The Star Market, it is largely being seen as a way for China to become more self-sufficient in core technologies against the backdrop of the US-China trade war, which has escalated into a race to become the global leader in technology.
Alibaba's shares fell 1.4 per cent to US$158.10 on Friday in New York, valuing the company at US$411.6 billion, making it the largest listed Chinese technology company. Shares of Tencent Holdings, the Chinese games publisher and social network operator, rose by as much as 1.6 per cent in Hong Kong trading to HK$335.40, giving it a market capitalisation of HK$3.17 trillion(US$405 billion).
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