Alibaba to Issue HK$80 Billion in New Shares
Alibaba Group Holding announced on August 23 that it will issue HK$80 billion (US$10.2 billion) in new shares in Hong Kong. This move aims to fund its artificial intelligence initiatives. The offering will be the largest primary follow-on share placement by a Hong Kong-listed company. It ranks as the world's third-largest this year, following similar offerings from Alphabet and Intel.
The company plans to sell 710 million shares at HK$112.70 each. This price reflects a 3.6% discount to its last closing price. Alibaba stated that all proceeds will go towards enhancing its AI capabilities. This includes investments in chips, infrastructure, and AI model development. Reports from the South China Morning Post noted that strong interest from investors led to an increase in the offering size.
In its recent earnings report, Alibaba revealed a 45% year-on-year increase in revenue from its cloud and AI segments for the April-June quarter. However, its net profit fell 75% as the company increased capital expenditures in AI. These expenditures surged 75% to approximately ₹80,000 crore (US$10 billion). CEO Eddie Wu Yongming indicated that the company expects to break even on its AI investments within three years. He also mentioned the potential to reduce the payback period to about two years as gross margins improve.
Related coverage: Alibaba Cloud Growth Surges with $56 Billion Capex Plan.
The share placement is likely to affect investor sentiment in the technology sector. This is especially true for AI-related stocks. The strong demand for Alibaba's shares may show increased interest in AI investments. This could lead to higher valuations in the tech space.
Watch for Alibaba's upcoming quarterly earnings report. It will provide further insights into the performance of its AI investments and overall financial health.
Based on reporting by: livemint.com, businesstimes.com.sg