Alibaba Weighs November Window for $10 Billion Listing

(Bloomberg) --Alibaba Group Holding Ltd. is deciding between launching a sharply reduced $10 billion Hong Kong share sale in November or delaying the deal till next year as global uncertainty mounts, people familiar with the matter say.

China’s largest company is weighing its options for the city’s biggest first-time sale of stock since 2010, but the window for pulling off a mega deal in 2019 is closing fast. Alibaba can proceed with a required listing hearing ― either after its Nov. 1 earnings report or after its Nov. 11 Singles’ Day shopping gala ― or risk postponing a deal altogether till 2020, people familiar with the matter say. Alibaba is reluctant to drag things out as uncertainty mounts around U.S.-Chinese tensions and the global economic outlook, they said, asking not to be identified talking about a sensitive matter.

Alibaba’s listing was to be the crowning achievement of a Hong Kong stock exchange that lost many of China’s brightest technology stars to U.S. rivals. Instead, pro-democracy and anti-China protests erupted over the summer, rattling the financial hub and hammering mainland-related stocks. Billionaire Alibaba co-founder Jack Ma’s dream of listing closer to home ― a move that would have curried favor with Beijing and hedged against trade war risks ― faces backfiring without an offering.

The New York Stock Exchange-listed company is now considering the week after its quarterly earnings report or China’s largest online retail bonanza as the most likely openings, the people said. Alibaba is looking to raise closer to $10 billion, about half of an original target, the people said. The company can capitalize on the strong recent reception for Hong Kong IPOs, with several companies including Anheuser-Busch InBev NV’s Asian unit raising $1 billion or more. Alibaba declined in an email to comment.

It “is closer to home, and people are more familiar with its business here, so it could get a good valuation if it listed in Hong Kong,” said Julia Pan, a Shanghai-based analyst with UOB Kay Hian.

Any decision will hinge on investors’ reaction to the financial results, which are expected to underscore the e-commerce juggernaut’s slowest pace of revenue growth in about three years.

Alibaba has already handed in all its documents and made a confidential filing. Informal feedback from investors show there’s keen interest, but Alibaba is in no rush to kick off the offering as political considerations take the upper hand now, the people said. One wrinkle: The local exchange requires companies to list within six months of filing, or reapply. The online emporium is said to have picked China International Capital Corp. and Credit Suisse Group AG as lead banks.

A successful Hong Kong share sale could help finance a costly war of subsidies with Meituan Dianping on food delivery and travel and divert investor cash from rivals like Meituan and WeChat operator Tencent Holdings Ltd. Alibaba could put the capital to work by investing in new technologies such as artificial intelligence (AI) or fast-expanding affiliates such as Ant Financial. Courting investors closer to home also could serve as a buffer of sorts should U.S.-Chinese tensions worsen. Already, U.S. lawmakers such as Senator Marco Rubio are agitating for measures to curb investment flows to Chinese companies, including the extreme option of tossing U.S.-listed companies off American bourses.

“Alibaba could use Hong Kong as a plan B for capital markets and also deploy the capital to areas that need cash like cloud, Ant Financial and AI,” Pan said.

But should the company decide to plow ahead, it will most likely have to contend with difficult questions from would-be investors.

Alibaba ― which had roughly $57 billion of cash and equivalents as of June ― rode a national e-commerce boom that stemmed from an increasingly affluent middle class. But like arch-foe Tencent, it’s struggling to sustain momentum as growth slows in the world’s No. 2 economy and as China clashes with the U.S. over issues ranging from trade and technology to investment.

At home, signs of strain are growing. China’s gross domestic product growth is expected to slump below 6%, which would be the economy’s slowest pace of expansion in three decades. Alibaba is projected to report revenue growth of 37% for the September quarter.