Alibaba closes in on home with dual Hong Kong primary listing

Alibaba will apply for a dual primary listing on the Hong Kong stock exchange, which analysts say lays the groundwork to allow mainland Chinese investors access to its shares and help minimize disruption if U.S. regulators force it to quit. withdraw from Wall Street.

The New York-listed Chinese e-commerce group, which has a secondary listing in Hong Kong, said its board had authorized management to apply for a primary listing on the Hong Kong Stock Exchange and the process should be completed. by the end of 2022. .

Having a primary listing in Hong Kong is a requirement for Chinese dual-listing groups to be included in the city’s Stock Connect program, which allows mainland Chinese investors to trade a company’s shares. Inclusion can help bolster a stock’s valuation and liquidity. A dual primary listing means that Alibaba will be subject to the full rules of the Hong Kong stock exchange as well as those of New York.

Hong Kong-listed shares of Alibaba were down 6% at the midday break on Tuesday. The Hang Seng Tech Index, which tracks the 30 largest listed tech companies in the territory, rose 1.6%.

Chief Executive Daniel Zhang said the company hopes to foster “a broader and more diverse investor base to share in Alibaba’s growth and future, particularly from China and other markets in Asia.”

Analysts said the move marked another step towards eventual inclusion in the login system and could simplify a transition to Hong Kong-only commerce if U.S. regulators force Alibaba and other New York-traded Chinese companies to withdraw. remove from the list.

“It’s a very smart decision to meet the demands of the Chinese [securities regulator] So ultimately Alibaba can be included in Stock Connect, and even if they get delisted in the US, they still have a back-up plan,” said Dickie Wong, head of research at Kingston Securities.

U.S. regulators have demanded that Chinese companies make detailed audit reports available by 2024 or be kicked off Wall Street. The Financial Times reported on Monday that Beijing was preparing a scheme to bring some Chinese groups into compliance with US rules requiring public companies to let regulators inspect their audit records. But officials in Washington are skeptical that most will achieve full compliance.

Inclusion in the Stock Connect program is also not guaranteed, as a majority of annual trading activity must take place in Hong Kong before a company with a primary listing can qualify.

In its Tuesday announcement, Alibaba said there had been a “significant increase in its public float in trading volume” in Hong Kong since its secondary listing in late 2019.

But he acknowledged that the average daily trading volume over the past six months in Hong Kong was around $700 million, while New York’s was around $3.2 billion. This left Hong Kong’s share at less than 20% of the total and far from qualifying for the Stock Connect.

The request for a dual primary listing also came after the company revealed that the management of Ant Group, its affiliated payment and fintech platform, was no longer serving as a partner of Alibaba, under the Ant’s efforts to revamp corporate governance after a government crackdown.

Comments are closed.