Alibaba Group has announced that the company’s board of directors has authorized management to apply for an initial listing on the Main Board of the Hong Kong Stock Exchange. Upon completion of the initial listing process, which is expected to occur before the end of 2022, Alibaba will be a dual-primary listed company on the New York Stock Exchange in the form of American Depositary Shares (ADS) and on the Hong Kong Stock Exchange in the form of ordinary shares. Alibaba went public on the NYSE in September 2014, which, at the time, was the largest IPO in history.
Alibaba currently has a secondary listing on the Main Board of the Hong Kong Stock Exchange and will apply for an initial listing under the rules and regulations of the Hong Kong Stock Exchange. The company’s U.S.-listed ADSs and Hong Kong-listed shares are fungible, and investors may continue to elect to hold their shares in the form of ADSs traded on the New York Stock Exchange or ordinary shares traded on the Hong Kong Stock Exchange.
The Hong Kong listing is intended to encourage a broader and more diversified investor base to participate in the group’s growth, particularly from China and other markets in Asia, said Daniel Zhang, chairman and chief executive officer of Alibaba Group. “Hong Kong and New York are both important global financial centers that are characterized by openness and diversity. Hong Kong is also the launch pad for Alibaba’s globalization strategy, and we have full confidence in China’s economy and future,” Zhang commented.
Pursuing a dual initial listing will also allow Alibaba to apply for the Stock Connect program, which enables investors from mainland China to buy the company’s shares more easily. According to Reuters, the Hong Kong Stock Exchange changed its rules in January to allow “innovative” Chinese companies with weighted voting rights, or variable interest entities (VIEs), to have a dual initial listing in the city. Under a VIE structure, a Chinese company sets up an offshore entity to list overseas, allowing foreign investors to take a stake in the stock.
Since the company’s secondary listing in Hong Kong in November 2019, its market capitalization and transaction volume on the Hong Kong Stock Exchange have increased significantly. For the six months ended June 30, 2022, Alibaba’s average daily trading volume in Hong Kong was approximately $0.7 billion, compared to an average daily trading volume of roughly $3.2 billion in the U.S. Given the company’s significant presence in Greater China, the company believes that dual primary listing status would allow it to expand its investor base and increase liquidity, particularly access to investors in China and other Asian countries.
Shares of Alibaba rose 4 percent when the market opened in Hong Kong in response to the news.
