Caixin
Nov 11, 2020 05:17 AM
BUSINESS & TECH

Alibaba Stockholders Convert 1.3 Billion Shares From ADRs to HK Ordinary Shares

Alibaba’s largest shareholder Softbank and billionaire co-founder Jack Ma have been cutting their holdings.
Alibaba’s largest shareholder Softbank and billionaire co-founder Jack Ma have been cutting their holdings.

Some shareholders of Alibaba Group Holding Ltd. converted 1.3 billion of Alibaba’s New York-listed shares into the company’s Hong Kong-listed shares, the biggest such move since the Chinese tech giant completed its secondary offering in Hong Kong about a year ago.

Alibaba’s Hong Kong-listed shares deposited at Citibank, the depositary bank for Alibaba’s American Depositary Receipts (ADRs) and Hong Kong ordinary shares, increased by about 1.26 billion shares Nov. 5, data from the Hong Kong Stock Exchange’s CCASS shareholding information system shows. As the Hong Kong exchange completes securities and monetary settlements two days after the trade date, the move occurred Nov. 3.

The position change was completed in one day and involved a large number of shares, though the stockholders involved haven’t been identified. Considering Alibaba’s relatively dispersed shareholding structure, only top shareholder SoftBank would have the capacity if the move involved a single shareholder. But it’s also possible that Citibank processed position changes by several shareholders as one transaction.

Alibaba’s shares plunged by 5.1% Tuesday in Hong Kong, with nearly 64 million shares changing hands. Its ADRs sank more than 8% amid a broader tech stock retreat.

When Alibaba listed its shares in Hong Kong, 4.75 billion ordinary shares were registered in CCASS, accounting for 22.22% of Alibaba’s total global equity. The remaining 77.78% not registered in CCASS reflects the number of Alibaba shares held by non-Hong Kong shareholders through ADRs, Cayman Islands ordinary shares and physical shares.

A change in the number of Hong Kong ordinary shares held at Citibank changes would reflect either investors trading their Hong Kong-listed Alibaba shares or non-Hong Kong investors converting their Alibaba holdings into Hong Kong ordinary shares.

Since CCASS has no record of shareholders increasing or decreasing their holdings of Alibaba’s Hong Kong shares, the change indicates that Alibaba’s existing shareholders converted positions rather than trading shares. After the move, the number of registered shares in CCASS increased to 28.9% of Alibaba’s total global equity from 22.22%.

SoftBank, which owns 25% of Alibaba stock, has been slowly selling Alibaba shares to raise money — most recently in May, when it entered into derivative transactions to sell $11.5 billion of Alibaba stock.

Ma, Alibaba’s second-largest shareholder, has also cut his stake in the company over the past year to 4.8% from 6.2%, cashing out more than $6.1 billion over eight months since the company launched its secondary listing in Hong Kong. Alibaba’s third-largest shareholder and co-founder Joe Tsai reduced his stake 2% to 1.6% between November and July, filings showed. The sales amounted to $1.7 billion for Tsai based on Alibaba’s average stock price during the period.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

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