BABA Alibaba Group Holding Limited

By Joanne Chiu and Stu Woo 

HONG KONG -- Alibaba Group Holding Ltd.'s Hong Kong listing has given a fresh boost to what was already China's most valuable technology company.

The e-commerce giant's stock jumped 5.6% to 204 Hong Kong dollars ($26.07) Thursday, giving investors who subscribed to the $11.2 billion secondary offering a nearly 16% gain in three days since the shares began trading on Tuesday morning.

Alibaba leaders said they wanted to list in Hong Kong because, compared with its primary listing in New York, the semiautonomous Chinese city has more investors who regularly use its products. Alibaba dominates Chinese online retail and is pushing into food delivery, cloud computing and other businesses.

"The U.S. investors probably gave it a discount it doesn't deserve," said Bernstein analyst David Dai. He said the high share price will help Alibaba motivate employees with stock options, raise money in the future and boost the company's international prestige.

Alibaba's American depositary receipts rose 5.4% over the past three sessions to US$200.82. That is just a tad off its historic high in June last year, and gives the company a market value of more than half a trillion dollars.

The difference between the two share-price moves in the last three trading days is because the Hong Kong stock was initially cheaper, since it was priced last week at a discount to the U.S. securities. After Thursday's action, it is now trading at a significant premium.

Some Chinese funds in Hong Kong have bought Alibaba stock, and in coming months investors based in mainland China may rush to do the same once the company's shares are available via a stock connect program. If so, Alibaba's stock may rise further, said David Gaud, Asia chief investment officer and head of discretionary portfolio management at Pictet Wealth Management.

"Mainland investors are more comfortable with high valuations," he said.

At Wednesday's U.S. close, Alibaba was trading at a price of 24 times estimated earnings for the next 12 months, lower than its rival Tencent Holding Ltd.'s nearly 27 times for the same period, according to FactSet.

Alibaba leaders wanted its 2014 initial public offering to be in the Asian financial hub, but at the time the Hong Kong exchange's "one shareholder, one vote" principle clashed with the company's complicated structure that gives founders more control over other shareholders. Alibaba settled for New York, where it raised $25 billion, a record that may be eclipsed in coming weeks by oil giant Saudi Aramco's IPO. Hong Kong's exchange since relaxed its rules, paving the way for Tuesday's listing.

The exchange is now reaping extra business. Alibaba shares valued at HK$8.37 billion traded hands on Thursday, making it the city's most active stock and accounting for more than a 10th of total market turnover by value.

On Wednesday, the city's index compiler said Alibaba will join the Hang Seng Composite Index from Dec. 9. The company isn't yet eligible for the city's benchmark Hang Seng Index, but the index compiler will consult investors on whether to include companies with dual-class shares to its major benchmark in the first quarter of next year.

Alibaba hasn't laid out detailed plans on how it intends to use the $11.2 billion it raised. The company already had nearly $33 billion in cash and equivalents as of Sept. 30. Alibaba leaders have said they simply wanted more flexibility, for example, to invest in expanding businesses or for potential acquisitions. The total raised may rise to about $13 billion if bankers underwriting the deal exercise an option by mid-December to buy more shares.

Write to Joanne Chiu at joanne.chiu@wsj.com and Stu Woo at Stu.Woo@wsj.com

(END) Dow Jones Newswires

November 28, 2019 07:20 ET (12:20 GMT)

Alibaba (NYSE:BABA)
Historical Stock Chart
From Mar 2024 to Apr 2024

Alibaba (NYSE:BABA)
Historical Stock Chart
From Apr 2023 to Apr 2024