Alibaba applies for one-to-eight stock split

Alibaba Group Holding, operator of the world’s largest ecommerce platform, has applied to split its ordinary shares: part of a move to increase the flexibility of its capital raising activities, including the issuing of new shares.

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The New York-listed Chinese ecommerce giant is proposing to split each of its ordinary shares into eight, according to a statement on its website. Under the changes, one American Depositary Share (ADS), which currently represents one ordinary share, will represent eight ordinary shares. Voting rights of shareholders will remain the same.

“The board of directors is proposing the share subdivision to increase the flexibility for the company in future capital market activities,” said the company, which owns South China Morning Post, in its statement. “Among other reasons, the one-to-eight share subdivision will increase the number of shares available for issuance at a lower per-share price, and the board of directors believes that this will increase flexibility in the company’s capital raising activities, including the issuance of new shares.”

The move comes after speculation the ecommerce firm has filed for a Hong Kong listing, which could raise as much as US$20 billion in what would be the city’s largest IPO, according to Bloomberg, which cited people familiar with the matter. It said the company has picked China International Capital Corporation and Credit Suisse Group as its lead banks.

Alibaba reiterated that it does not comment on market rumors. Hong Kong Exchanges & Clearing Limited (HKEX), the operator of Asia’s second-largest capital market, declined to comment.

As of June 7, Alibaba had 4 billion ordinary shares valued at US$0.000025 each, forming a US$100,000 share capital. The share split would raise the number of shares to 32 billion at a par value of US$0.000003125 each. The company’s shareholders will vote for the changes at the annual general meeting on July 15 in Hong Kong. If approved, the change has a year to come into effect.

The Hangzhou-based company raised US$25 billion in its initial public offering in New York in 2014, marking the world’s largest flotation in history. Despite wanting to file in Hong Kong, the ecommerce giant turned to the US after growing frustrated at the city’s listing rules.

The HKEX had insisted Alibaba’s dual-class share structure meant ordinary investors were at a disadvantage, as founders or key management hold larger voting rights.

In a blog post at the time, vice-chairman Joe Tsai wrote that “the question Hong Kong must address is whether it is ready to look forward as the rest of the world passes it by.”

To hit the message home, Hong Kong was surpassed in 2017 by New York, Shanghai, and Shenzhen as the No. 1 market for IPOs, as technology start-ups and so-called “new economy” stocks like Chinese video-streaming site iQiyi Inc sought to raise capital outside China and Hong Kong.

Jolted by the desertion, the HKEX and Hong Kong’s Securities & Futures Commission (SFC) pushed through a reform of the city’s listing rules to allow dual-class share companies to list in the city, in an attempt to draw tech companies, particularly those from China, to the city’s markets.

The change attracted the likes of smartphone maker Xiaomi, which raised US$5.4 billion last July, and food delivery service app Meituan Dianping, which raised US$4.2 billion in September and made Hong Kong the world’s top IPO market in 2018.

The listing reforms, the biggest overhaul of the city’s financial regulations in three decades, were part of Hong Kong’s program to revitalize its capital market to keep its edge as the world’s favorite place for raising capital. Hong Kong was the number one destination for IPOs in six of the past 10 years, surpassing New York and Shanghai.