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On November 26, 2019, Alibaba was officially listed on the Hong Kong Stock Exchange on November 26, 2019, becoming the first Chinese Internet company to be listed on both the Hong Kong Stock Exchange and the NYSE. This is Alibaba The third IPO in 20 years and the second IPO in Hong Kong.

Then the problem followed:

Why does Ali have a secondary listing on the Hong Kong Stock Exchange?

Is there an urgent need for financing due to a shortage of funds?

What is the purpose of listing in the two places?

What are the risks?

How does this affect the capital market?

This article will answer one by one.

Is Ali short of money?

A current speculation on Ali’s listing is that the company needs more funds to maintain high-intensity investment.

This view is not entirely unreasonable. Ali is currently making high-intensity investments, such as the acquisition of NetEase Koala for US $ 2 billion and the capital increase of US $ 3.3 billion for Cainiao Network. In the next three years, 100 billion yuan will be invested in new technologies. These are large capital investments. Therefore, the fundraising can also be seen as a supplementary ammunition for the more brutal competitive environment in the future.

However, from the perspective of its financial performance, the main incentive for Ali to “go home” through fund raising is unconvincing. This is mainly because Ali itself is a “cash cow” company. It does not Lack of funds.

What is a “cash cow”? According to the content of “Super Investor”,Enterprises need to meet the following characteristics: the return on net assets is high enough, there can be a large amount of cash inflows in annual operating activities, the scale of net profits is high, and the asset-liability ratio is relatively low.

As can be seen from the cash flow statement, Ali’s annual operating activities inflowed a large amount of cash during the fiscal year 2016-2019, and the inflow of cash continued to expand. Among them, Ali’s net profit is relatively large, and cash flow from operating activities is mainly derived from the company’s continuing operating profit.

Data source: company announcement

After years of business development, Ali has abundant cash reserves. As of the second quarter of fiscal 2020, Ali’s cash and cash equivalents reached 248.272 billion yuan. Ample cash reserves demonstrate the company’s strong ability to resist risks.

The return on equity (ROE) is used to reflect the level of return on shareholders’ equity and to measure the efficiency of a company’s use of its own capital.


Data source: company announcement

Alibaba has maintained a return on net assets of more than 15% from FY2015 to FY2019, which reflects Alibaba’s continued super profitability.

The asset-liability ratio reflects the company’s long-term debt service ability. An excessively high asset-liability ratio indicates that the company’s financial risk is too high. For a fast-growing company, the company’s business development needs to obtain external funds, so the asset-liability ratio is generally high. However, for mature and stable companies, the lower the asset-liability ratio, the better, because an excessively high debt ratio will generate a high amount of interest at the cost.

Data source: company announcement

Ali’s asset-liability ratio has been below 40% in FY2015-FY2019. The low level of asset-liability ratio indicates that the company’s long-term debt repayment pressure is small.

To sum up, Alibaba’s annual operating activities can ensure cash inflows, higher net profit scale, high return on net assets and low asset-liability ratio, indicating that the company is not very strong in listing financing Demand.

What is the market without money?

Alibaba ’s intention to satisfy some deeper structural needs, including the following:

Improve capital mobility

According to the financial report, Ali’s cash balance at the end of fiscal year 2019 was 18.5 billion yuan, and in the second quarter of fiscal 2020, the balance of cash and cash equivalents reached 248.3 billion yuan, an increase of almost 50 billion. Strong, the company’s investment should not have too much financial pressure.

So from this perspective, this is more likely to reduce the distance with Asian investors, andThe time difference between the exchange and the New York Stock Exchange, Ali’s two listings will provide investors with a nearly 24-hour full coverage trading environment, which will effectively improve liquidity.

In addition, Alibaba completed the 1: 8 stock split plan and split the original 4 billion shares into 32 billion shares, further reducing the investment threshold and increasing trading activity.

Raising Alibaba’s valuation

Second, after Alibaba’s listing in Hong Kong, Hong Kong investors and domestic investors who trade through China Stock Connect can invest in Alibaba, which will help Ali further expand its investor base, and Ali is closer to Chinese investors, which is expected to obtain Higher valuation premium.

Reduce dependence on a single capital market

Multiple listings can also broaden financing channels and reduce dependence on the US capital market. The U.S. Trade Representative Office has repeatedly included Ali in the “notorious market” list for selling counterfeit goods, which makes the company’s legal risks continue to increase. Obviously, in the context of the trade war, Ali could not stay out of the situation, and was also under pressure from the United States. In addition, the Trump administration’s policies also have great risks of instability, so the listing of the two places is undoubtedly Ali’s self-protection.

Make up for CDR implementation failure

Alibaba has considered returning to A shares through the CDR method, and the SFC also issued the “Administrative Measures on Issuance and Transaction of Depositary Receipts (Trial)” in an attempt to clear the obstacles, but the implementation of the Internet companies went public in the US Both have suspended the issuance of CDRs, and the listing on the main board is not favorable, so Hong Kong stocks have naturally become the best choice to approach Asian investors. However, Ali also stated in the prospectus that if there is an opportunity, it may still be listed on the mainland exchange, so this possibility cannot be ruled out.

Risk of listing in Hong Kong

Alibaba’s listing on the Hong Kong Stock Exchange will definitely benefit a lot, but there are certain disadvantages.

Multiple listings will increase the linkage of stock prices and will inevitably increase the complexity of Ali’s market value management. When negative news appears on one exchange, it will inevitably affect the stock prices of other exchanges, which is also a test of the market value management ability of listed companies in many places.

What is the sign of Ali’s listing in Hong Kong?

Ali’s ringing the bell again at the Hong Kong Stock Exchange is a clear stimulus signal for the technology industry itself. This solves the problems left over by many Chinese companies that cannot be listed in Hong Kong due to policy reasons.

As early as 2007, Alibaba listed the B2B business on the Hong Kong Stock Exchange, and once became the world’s largest IPO of online stocks after Google’s listing, with a market value of HK $ 19.6 billion and the first Internet market value in China to exceed 20 billion Dollar company. However, due to development considerations and the stock price plummeted due to the global economic crisis in 2008, Alibaba eventually delisted from the Hong Kong stock market in 2012.

Alibaba has since tried to re-list on the Hong Kong stock market, but due to the company’s own special shareholding structure, that is, the company’s management shareholding ratio is low, and the two largest shareholders at that time were Softbank (36.7%) and Yahoo (24%) , if the direct listing means that management will Lost control of the company. In response to this problem, Ali has formulated a well-known “partner” system, in which partners control the nomination and appointment of board members, thereby bypassing the traditional structure of allocating directors’ nomination rights in accordance with shareholding ratios, and thus the company Hold firmly in the hands of management such as Ma Yun, Cai Chongyi.

However, the operation of this “different rights on the same shares” is contrary to the principle of “same rights on the same shares” of the Hong Kong stock market regulator, which directly led to Ali’s eventual abandonment of Hong Kong and departure to the United States.

September 18, 2014, Eastern time, Ali officially landed on the New York Stock Exchange, with an issue price of US $ 68 per share, and an initial public offering of approximately US $ 25 billion, setting a record for US stock IPO financing.

The loss of Ali ’s capital market in Hong Kong has caused a huge shock. In the face of the 33-month consecutive rise in Ali’s stock price and a cumulative increase of more than 270%, it was obviously a huge loss to shut it out that year. It has become a direct incentive for the major reforms of the Hong Kong Stock Exchange since then.

On April 24, 2018, the Hong Kong Stock Exchange issued new rules that allow companies with dual equity structure to list on the main board. Since then, Xiaomi and Meituan have gone public in Hong Kong in July and September respectively, becoming one of the beneficiaries of the new regulations.

On November 26, 2019, Alibaba was listed on the Hong Kong stock market. The opening price was 187 Hong Kong dollars, which was 6.25% higher than the issue price of 176 Hong Kong dollars. After the stock price rose, the company’s market value exceeded 4 trillion Hong Kong dollars, exceeding Tencent’s HK $ 3.27 trillion market valuebox “>