Chinese e-commerce giant Alibaba Group is upgrading its shares in Hong Kong to a primary listing, following through on a plan first proposed a little over two years ago and potentially allowing the company to tap massive flows of mainland Chinese capital.
The Hangzhou, China-based company first listed on the New York Stock Exchange in 2014, raising nearly $22 billion in what was the largest U.S. IPO ever. Alibaba then opened a secondary listing in Hong Kong in 2019, raising an additional $13 billion.
In 2022, Alibaba’s board applied to upgrade its Hong Kong stock to a primary listing. On Friday, shareholders finally approved the plan, according to a filing with the Hong Kong stock exchange.
Alibaba’s listing on the Hong Kong stock exchange will be upgraded on Aug. 28. No new shares will be issued, the company said in its filing.
The company’s Hong Kong-traded shares are up just 0.8% in Friday trading in Hong Kong, as of 3:15pm local time.
Why did Alibaba upgrade its listing?
The upgrade means that Alibaba’s shares now qualify to be part of Stock Connect, a program that connects Hong Kong’s stock exchange to bourses in Shanghai and Shenzhen.
Joining Stock Connect will allow eligible mainland Chinese investors to purchase Alibaba shares. That could lead to capital inflows of as much as $19.5 billion to Alibaba in the first six months of being part of the scheme, Bloomberg estimates.
Alibaba shares have lost about 70% of their value since their record high in October 2020.
The company’s e-commerce business is being challenged by new competitors like PDD Holding’s Pinduoduo and ByteDance’s Douyin. China’s slower-than-expected recovery in consumer spending is also pressuring Alibaba’s growth.
Geopolitics are also weighing on Alibaba’s business. Last year, the company shelved plans to spin off its cloud computing unit as an independent company, blaming U.S. export restrictions on advanced chip sales to China.
Alibaba reported $243.2 billion yuan ($34.1 billion) in quarterly revenue last week, below expectations. Revenue at Alibaba’s e-commerce division, which still make up the lion’s share of its business, fell 1% year-on-year to 113.4 billion yuan ($15.9 billion), despite increases in order frequence. Cloud computing revenue increased 6% to reach 26.5 billion yuan ($3.7 billion).
