China’s online shopping giant Alibaba announced on Tuesday that it would seek a major listing in Hong Kong. This will eventually allow more people in mainland China to invest in it, providing a buffer in case they are forced to delist. Over regulatory concerns in the United States.
This list is the latest signal that Chinese companies are under pressure from regulators on both sides of the Pacific and are looking for ways to mitigate risk. It also shows how the former romantic relationship between Chinese tech companies and Wall Street is coming to an end.
For the past two years, Chinese companies seeking capital in the United States have struggled in cracking down on China’s widespread regulation of Big Tech. Alibaba’s financial company Ant Group has delisted its last-minute blockbuster US listing at the request of Chinese regulators. Another study of Didi, a ride-hailing service company, resulted in the acquisition of shares just six months after the float in New York.
At the same time, US regulatory agencies have been working to enforce Trump-era rules that require better audit disclosure. The Chinese government claims that much of the information, especially sensitive data collected by Internet companies, cannot be shared abroad. Despite ongoing debate between US and Chinese regulators, disagreements could lead to hundreds of Chinese companies being delisted.
For Alibaba, the new Hong Kong listing agreement provides the company with a safety net against such risks. It also boosts the company by making it accessible to millions of Chinese traders who previously had limited ability to buy stock in the company they shop every day. Alibaba’s share price, traded on listing news in Hong Kong, rose more than 5% on Tuesday morning.
Alibaba was already trading in Hong Kong, but the new listing process will help leverage a program that connects the Hong Kong and Chinese stock exchanges. Alibaba said in a filing that it plans to complete the process by the end of the year.
“Hong Kong is also the starting point for Alibaba’s globalization strategy,” said Daniel Zhang, CEO of the company, in a statement. He added that the new listing will promote “a broader and more diverse investor base to share Alibaba’s growth and future, especially from other markets in China and Asia.”
The dual listing marks a major change from less than a decade when Alibaba sold its shares in New York in 2014, making it the world’s largest initial public offering. At that time, the company was a symbol of a fast-growing company. It has rapidly revolutionized China’s tech sector, which appears to be sweeping the world.
However, since 2020, Alibaba’s share price has more than halved as a result of crackdowns by Chinese regulators and strict Covid controls that have hit domestic spending. The Chinese government has imposed a series of serious fines on the country’s largest Internet company. Alibaba was ordered to pay $ 2.8 billion for antitrust violations in 2021. Just last week, Ride Hailing giant Diddy was charged $ 1.2 billion.
Analysts say regulators could ease pressure on Chinese Internet companies and help slow economic growth. But many consider Beijing’s tense grip on Big Tech to be a feature that stays here.
