Alibaba Group Holding, the largest e-commerce company in China, announced on Tuesday (July 26) that it would submit an application for a primary listing in Hong Kong, a move that could make its shares available to investors in mainland China thanks to the city's exchange connections with Shanghai and Shenzhen.
The company anticipates finishing the listing by the end of 2022, at which point it will be a dual-primary listed company in Hong Kong and New York. Alibaba will become a dual-primary listed company on the New York Stock Exchange in the form of American Depositary Shares (ADS) and on the Hong Kong Stock Exchange in the form of ordinary shares once this change is completed.
"We have received approval from the board to apply to add Hong Kong as another primary listing venue, in the hopes of fostering a wider and more diversified investor base to share in Alibaba's growth and future, especially from China and other markets in Asia," Daniel Zhang Yong, the chairman, and chief executive of Alibaba said.
"Hong Kong is also the launch pad for Alibaba's globalization strategy, and we are fully confident in China's economy and future," Mr. Zhang said.
Alibaba's listing status has been upgraded to a principal listing, making it eligible to participate in the Stock Connect program between the Shanghai and Shenzhen markets and Hong Kong. Mainland Chinese investors can trade stocks listed in Hong Kong under the eight-year-old trans-border investment plan, while foreign funds can invest in China's A-shares through Hong Kong.
Alibaba's public float and transaction volume in Hong Kong have significantly increased after its secondary listing in that city in November 2019. According to Alibaba, the average daily trade volume for the first half of the year was roughly $700 million, while the daily average in the U.S. was about $3.2 billion.
According to the company's statement, it anticipates that having a dual-primary listing status would allow it to broaden its investor base and facilitate incremental liquidity, in particular, expand access to China- and other Asia-based investors."
Following in Alibaba's footsteps, JD.com, Baidu, NetEase, and Bilibili raised funds in Hong Kong through secondary listings. Their equities are not accessible to investors in mainland China since they do not meet the criteria for inclusion in the Stock Connect under the existing listing guidelines.
"More U.S.-listed Chinese companies will turn to Hong Kong for primary listings because they can't join the Stock Connect through the secondary listing," Ernie Hon said, head of research at Essence International, adding that Alibaba's shares will outperform in the short term on the news.
