Alibaba shareholders agreed to split the stocks, which could boost the company’s shares before the Hong Kong IPO. Shareholders voted for a one-to-eight stock split of at the company’s annual general meeting. Splitting the stocks will lead to an increase in the number of shares at a lower price, Alibaba said, adding that this could help “capital raising activities” in the future.
The e-commerce giant is planning an initial public offering on the Hong Kong Stock Exchange. The company’s shares are already listed on the New York Stock Exchange.
Alibaba shareholders voted overwhelmingly in favor of a stock split that the e-commerce giant said could help further capital raising activities. The stock split, which should come into force before July 15, 2020, will split one ordinary share into eight. This means that the current number of ordinary shares – of 4 billion shares – will rise to 32 billion shares. The vote was held at the annual general meeting of Alibaba late on Monday.
This comes at a time when Alibaba is looking at a public offering (IPO) in Hong Kong that could raise up to $20 billion. In a proposal to divide shares issued last month, Alibaba said the move would boost the number of shares at a lower price, but more importantly, it would “increase flexibility in the Company’s capital raising activities, including the issuance of new shares”. This appears to indicate a possible secondary listing in Hong Kong. Alibaba has already been listed on the New York Stock Exchange after it presented its IPO in 2014. But the technology giant declined to comment on reports that the Hong Kong stock exchange was listed.
Alibaba may consider offering shares soon on the grounds that the company does not get “favorable multiples” in New York, and that the trade conflict between the United States and China could lead to “scrutiny” on the American listing. The stock split appears to be a step towards getting that listing in Hong Kong, as Hong Kong lifted restrictions that initially encouraged Alibaba to get listed in New York.
When it became first listed in 2014, Alibaba chose the New York Stock Exchange over the Hong Kong one because Hong Kong’s rules would not accommodate the company’s dual-class structure – which allows for weighted voting rights and gives the company’s founders and insiders more control. Hong Kong stock exchanges and the company that has been managing the exchange recently changed the rules and regulations, paving the way for Alibaba’s listing.
There are several reasons why the company wants to implement the stock split, the most important being to increase the number of shares in the hope of attracting new investors. Another reason is to cut the price of each share as the company feels the prices have become very high. When Alibaba listed its shares for an IPO in the United States in 2014, its share price was $68. On Monday, Alibaba closed just above $173.
Alibaba does not necessarily need more cash, but analysts said it could provide it with a boost that may help the company invest in new areas. As for listing, the company is obviously very rich, but that gives them a presence in the region from the standpoint of listings and provides them plenty of capital that hey can use well.