Alibaba Group Holding is selling $5 billion in convertible bonds to finance its share buyback, as the Chinese tech giant’s leaders declared e-commerce and cloud computing among their core businesses in a move “toward strategic clarity.”
The Hangzhou-based company, which owns the South China Morning Post, said it expects to raise nearly $4.5 billion from initial sales, while giving buyers the option to purchase an additional $500 million in notes, it said. according to documents filed with the Hong Kong and New York stock exchanges on Friday and Thursday.
The offering, the largest ever convertible bond deal in Asia and the largest in the world since 2008, has received a positive response from the market and has been several times oversubscribed, according to people familiar with the matter who requested anonymity because the information is private.
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Alibaba’s latest move shows that management has confidence in the company’s fundamentals, one of the sources said. The company has chosen to issue convertible bonds instead of US dollar bonds because they have lower financing costs, and the conversion will only take place after the price of Alibaba’s American Depositary Shares (ADS) reaches $161.6, the person said.
An advertisement for Alibaba’s e-commerce platform Tmall at a subway station in Shanghai. Photo: Bloomberg alt=An advertisement for Alibaba’s Tmall e-commerce platform at a subway station in Shanghai. Photo: Bloomberg>
The company announced in the first quarter that it would spend $4.8 billion to buy 524 million ordinary shares, equivalent to 65 million ADSs, marking its most aggressive share buybacks since 2021. It has bought back a total of $12.5 billion worth of shares in its financial sector. year ending in March.
On Thursday, Alibaba Chairman Joe Tsai and CEO Eddie Wu Yongming sent their first letter to shareholders since taking over from Daniel Zhang Yong last September, saying the company is returning to a startup mentality.
“Over the past 25 years, Alibaba has grown consistently, but has acquired the characteristics of a ‘big company,’” the letter said. “For the next 10 years, we reimagine ourselves as a start-up defined by entrepreneurship, innovation and our mission ‘to make it easy to do business anywhere’.”
Tsai and Wu highlighted e-commerce and cloud computing as Alibaba’s two core businesses. This comes after the company announced a comprehensive restructuring in March last year that would see six independently run entities spun out of the business, but later canceled plans to launch separate IPOs for smart logistics operation Cainiao and Alibaba Cloud.
The leaders said Alibaba’s domestic and international e-commerce units – Taobao and Tmall Group and International Digital Commerce Group – are now at the center of the group’s core e-commerce business, while other divisions such as Cainiao and on-demand delivery company Ele. I am expected to “deliver synergies that make our e-commerce businesses more valuable.”
Alibaba also aims to be the “leading provider of public cloud infrastructure and platform technology in China.”
The leaders also reiterated two strategic directions Wu first announced when he took office: “user first,” prioritizing user experiences in business strategy and product design to drive retention and repeat purchases, and “focus on AI.”
“Each of our businesses has vast numbers of use cases, all of which can leverage AI applications to unleash powerful value, and the deployment of AI will increase demand for computing and drive Alibaba Cloud’s growth,” Tsai and Wu wrote. Alibaba aims to be the “leading provider of public cloud infrastructure and platform technology in China,” they said.
The company will continue to invest for two purposes: accelerating growth in its core businesses and maintaining leadership in foundational technologies and innovations, including artificial intelligence.
The leaders said the company takes a “long-term perspective when making hard decisions.”
“We think in ten-year cycles because the development cycle of technology companies typically goes through the phases of investment, growth, harvest, profit and invariable decline,” they wrote.
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