HONG KONG (Reuters) – China’s Alibaba Group Holding Ltd plans to raise at least $ 5 billion from the sale of a dollar-denominated security this month, four people with knowledge of the matter said, amid regulatory scrutiny by the Chinese empire. – founder Jack Ma.
Depending on the investor’s response, the revenue could reach $ 8 billion, which the e-commerce leader is likely to use for general corporate expenses, one of the people said.
The fundraising will be a test of investor sentiment towards Alibaba, amid regulatory crackdowns against him and the financial technology Ant Group. Chinese officials have harshly criticized Ma’s business empire since he publicly criticized the country’s regulatory system in October, triggering a chain of events that resulted in the Ant Group’s $ 37 billion listing on the stock market being suspended.
Ma’s absence from public view during this period fueled social media speculation about his whereabouts.
The bond sale plan, including the schedule, is not finalized and is subject to change, said the people, who declined to be identified because they were not authorized to speak to the media.
Alibaba declined to comment.
Since Ma’s speech, Chinese regulators have launched an antitrust investigation on Alibaba and have ordered Fintech Ant to change its credit and consumer finance businesses, including the creation of a holding company to meet capital needs.
U.S. President Donald Trump has also heightened tensions by banning transactions with eight Chinese software applications, including the Ant Group’s mobile payment app Alipay.
Chinese regulators are also looking at Ant’s capital investments in dozens of companies and considering whether to instruct the company to divest some of those investments, Reuters reported.
“Investors will need Jack Ma to make some kind of public appearance to give them confidence that the bond will be well received,” said an Asian credit analyst at a European bank, who was not authorized to speak to the media and therefore , declined to be identified.
“Given Alibaba’s current situation, they will need to charge a premium price,” said the analyst. “But in the long run, Alibaba is still a company worth investing in.”
Hong Kong-listed Alibaba shares rose up to 4% on Wednesday, against a 0.4% drop in the benchmark. The share price had fallen 5.6% in the last three sessions.
Last month, Alibaba said it would increase the value of a share buyback program from $ 6 billion to $ 10 billion.
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Alibaba’s international bond offer, if finalized, would be the third in the group, Refinitiv data showed. It sold a $ 8 billion bond in 2014 and a $ 7 billion tranche in 2017, the data showed.
With its latest bond sale, Alibaba will join a number of Asian companies that, in recent months, have taken advantage of cheaper borrowing costs and abundant liquidity in global markets.
The companies sold totaled US $ 363.2 billion in US dollar securities in Asia last year, 9% more than the previous year and the highest value ever recorded, data from Dealogic showed.
The terms of Alibaba’s offer were not immediately known. Two of the people said that the term should be 10 years and that the marketing documents should be available as early as next week.
One of the people involved in the deal said that Alibaba wanted to use the issue to send a message to the market that “in light of the latest regulatory scrutiny, the company is still doing well and has the support of some investors.”
LightStream Research analyst Oshadhi Kumarasiri, who publishes on the Smartkarma platform, said that Alibaba has about $ 10 billion in long-term debt due in November, so it makes sense to refinance it – even if time suggests that is about inspiring confidence.
“However, I am more pragmatic and would still be concerned about going long on Alibaba with the current regulatory obscurity.”
Reporting by Sumeet Chatterjee, Julie Zhu and Kane Wu; Additional reporting by Scott Murdoch and Anshuman Daga; Christopher Cushing’s Edition