Alibaba seeks dual primary listing in Hong Kong stock market

Alibaba Group Holding Ltd said on Tuesday it will apply for a primary listing in Hong Kong, a move industry experts said will allow Chinese mainland investors to trade in the tech giant's shares via the stock connect mechanism linking the Shanghai, Shenzhen and Hong Kong bourses, inject new liquidity into the Hong Kong stock market and help bolster the company's market valuation.

Alibaba, which already has a secondary listing in Hong Kong, said it expects the primary listing to be completed by the end of this year.

If the plan pans out, Alibaba will become a dual-listed company－that is, it will have primary listings on both the New York Stock Exchange and the Hong Kong stock exchange.

A primary listing implies the issuer has met strict regulatory and financial reporting criteria of the bourse concerned, which leads to investors perceiving its stock as of high quality because the issuer is regarded as reputable.

In contrast, a secondary listing, which creates access to new capital markets, may have less stringent requirements and lower costs, and gives the issuer greater flexibility.

Daniel Zhang, chairman and CEO of Alibaba Group, said in a statement the company has received approval from its board of directors to apply to add Hong Kong as another primary listing venue, in the hope of "fostering a wider and more diversified investor base to share in Alibaba's growth and future", especially from the Chinese mainland and other markets in Asia.

"Hong Kong and New York are both major global financial centers, with shared characteristics of openness and diversity," Zhang said, adding Hong Kong is also the launch pad for Alibaba's go-global strategy, and the company has full confidence in the economy and future of the Chinese mainland.

Alibaba's Hong Kong-listed shares rose by 4.82 percent to close at HK$104.4 ($15.5) on Tuesday. The e-commerce giant listed on the New York Stock Exchange in September 2014, marking what was at the time the largest IPO in history. It raised $13 billion from the Hong Kong bourse via a secondary listing in November 2019.

A primary listing in Hong Kong will allow Alibaba to be included in the Shanghai-Hong Kong and Shenzhen-Hong Kong stock connect programs, which is expected to bring more convenience for Chinese mainland investors to directly invest in Alibaba and share the dividends from the new economy enterprise, said Chen Rui, director of the Digital Economy Integration Innovation Development Center at the Central University of Finance and Economics.

"The dual-listing of Alibaba in New York and Hong Kong is a strategic choice based on the current international situation and the overall trend of new economy's innovative development," Chen said, adding the move will further improve stock liquidity, bolster the company's market valuation as well as help Alibaba expand its business in more overseas markets apart from China and the US.

Chen said considering the uncertainties in overseas capital markets, more and more Chinese mainland companies listed in the US are likely to seek dual-listing via the Hong Kong stock exchange in the future. This is of great significance as it will enhance the pricing power of the Hong Kong stock market in the new economy segment, and consolidate the city's strategic position as an international financial center.

The Hong Kong stock exchange has changed its rules to allow innovative Chinese mainland companies with weighted voting rights or variable interest entities to carry out dual-listing in the city.

Wei Xiang, a professor from the University of Chinese Academy of Social Sciences, said Alibaba's latest move showed that leading enterprises in China's new economy sector have an increasing awareness and capacity to deal with multiple risks, demonstrate great confidence in the prospects of China's economy and plan to further align their high-quality resources with domestic capital.

The dual-listing will provide mainland-listed companies with more flexibility and reduce uncertainties from a single market, thus helping better protect the interests of investors, said Jiang Ping, a professor of finance at the University of International Business and Economics.