Alibaba's Hong Kong-listed shares took a sharp 5% hit on Thursday following a report that the Chinese tech giant is preparing to raise $5 billion through a convertible bond sale. This potential financial maneuver aims to bolster the company's liquidity and support its strategic initiatives, including a significant stock buyback program.

The shares closed the day 5.24% lower after falling more than 6% earlier in the session, making Alibaba the third worst performer on the Hang Seng index. Bloomberg initially reported the bond offering, citing anonymous sources, and later, Alibaba confirmed it plans to sell $4.5 billion worth of convertible bonds. The proceeds from this sale will primarily be used to repurchase some of its American depositary shares (ADS).

The New York-listed shares of Alibaba edged up by 1.26% in early trading on Thursday, reflecting a cautious optimism among investors despite the earlier drop in Hong Kong.

This move mirrors a similar step taken by Alibaba's rival,, which announced a $1.75 billion convertible senior note offering earlier in the week. Alibaba's decision to follow suit underscores the intense competition in the Chinese e-commerce market and the companies' need to secure capital for growth and stability.

Alibaba faced significant challenges in 2023, including a comprehensive corporate restructuring and a dramatic 86% drop in fourth-quarter net profit. In an effort to regain investor confidence, the company announced in February it would expand its share buyback program by $25 billion. This initiative aims to reinvigorate the company's stock and signal a commitment to shareholder value.

CEO Eddie Wu has emphasized a renewed focus on growth, pledging further investments to "reignite" the company's expansion. The funds from the bond sale are expected to fuel these efforts, particularly in Alibaba's core e-commerce and cloud services sectors. The company has been grappling with a domestic economic slowdown and cautious consumer spending in China, exacerbated by the lingering effects of strict Covid-19 restrictions.

In addition to bolstering its e-commerce operations, Alibaba is eyeing significant advancements in artificial intelligence (AI) and cloud computing. Earlier this month, the company unveiled an updated version of its Tongyi Qianwen large language model, a key component of its AI strategy. The firm has also engaged in a price war in the cloud services market, slashing costs by up to 97% to attract more customers.

Despite the current volatility, Alibaba's shares have shown some resilience, rising 4.03% on the Hong Kong Stock Exchange and 6.67% on the New York Stock Exchange year-to-date. This growth is a testament to the market's long-term confidence in Alibaba's strategic direction and its ability to navigate through economic and regulatory challenges.

The financial maneuver involving the convertible bonds also includes a so-called greenshoe option, which could increase the offering by an additional $500 million. The bonds, maturing in seven years, will offer an annual coupon of 0.25% to 0.75% and a conversion premium of 30% to 35%. Citigroup Inc., JPMorgan Chase & Co., Morgan Stanley, Barclays Plc, and HSBC Holdings Plc are facilitating the deal.

Alibaba's latest quarterly net income saw an 86% drop from the previous year, partly due to a writedown of its publicly traded holdings and increased expenditure to fend off competition. This significant decline highlights the ongoing financial and operational pressures the company faces.