Alibaba Group Holding Ltd. is seeking to raise 80 billion Hong Kong dollars, or 10.2 billion US dollars, in a major Hong Kong share offering. The Chinese e-commerce company announced on Sunday that the deal is designed to fund its push into global artificial intelligence.
The Hangzhou-based technology giant will issue 710 million shares priced at 112.7 Hong Kong dollars per share, confirming an earlier report by Bloomberg. The offering price represents a 3.6 per cent discount relative to the Friday closing price of Alibaba's American Depositary Shares in the United States.
According to Bloomberg data, the transaction marks the largest secondary share offering by a listed company in the history of Hong Kong. It is also the largest stock fundraising effort in the city since 2021, when technology investment firm Prosus NV sold 14.7 billion dollars worth of shares in Tencent Holdings Ltd.
Investor Reaction
The announcement immediately drew criticism from investor Michael Burry, who became prominent for his trades highlighted in the book and film The Big Short. Writing on social media on Sunday, Burry said that he could not approve of Alibaba's new share issue.
Burry stated that the equity sale was another troubling example for the company, warning that its return on invested capital would continue to fall. He noted that he had recently shifted his Alibaba holdings into rival e-commerce platform JD.com Inc. and had planned to restore most of his Alibaba position, but has now abandoned those plans.
Burry added that he would only consider re-entering Alibaba if the company's share price dropped by roughly 50 per cent.
Artificial Intelligence Strategy
The massive fundraising comes as Alibaba rapidly scales up its capital spending to remain competitive in the global artificial intelligence sector. The company's quarterly capital expenditure has approached 10 billion US dollars, driven by rising costs for computing infrastructure and specialized hardware.
Alibaba said proceeds from the stock sale will be directed toward advancing artificial intelligence capabilities across its technology ecosystem, including infrastructure upgrades and expansions. Under the terms of the transaction, Alibaba's shares will be subject to a 90-day lock-up period. The offering is being managed by joint bookrunners China International Capital Corp., HSBC Holdings plc, Morgan Stanley, and UBS Group AG.
Financial Pressures and AI Growth
The heavy outlay on technology has placed substantial short-term pressure on Alibaba's financial performance. For the quarter ending in June, the company reported that net profit fell by more than 75 per cent to 10.5 billion yuan, or 1.6 billion US dollars, while recording a free cash outflow of 6.6 billion US dollars.
Despite financial headwinds, Alibaba has established itself as one of the largest artificial intelligence investors among Chinese technology companies, according to Bloomberg. The firm's flagship model family, Qwen, has become the most widely adopted set of artificial intelligence models globally. Alongside its dominant market position in domestic cloud computing, Alibaba is restructuring its portfolio to concentrate capital on computer chips, data centers, and large language models.
