China’s Alibaba, opens new tab shares slumped in Hong Kong trade on Monday after it launched a $10.2 billion share sale at a steep discount to fund its AI ambitions, with investors focused on stock dilution and execution risks.
The e-commerce and cloud computing giant said it would sell HK$80 billion ($10.2 billion) of new shares at HK$112.70 each, an 8.4% discount to Friday’s close, to fund chips, AI infrastructure and models. AI has become Alibaba’s biggest driver of revenue growth at a time when e-commerce growth is stagnating, and its Qwen AI models are some of the most popular in China. Even so, some investors have reservations about how successful it will be.
“Alibaba’s DNA is in e-commerce, not advanced tech,” said Yang Tingwu, vice general manager of asset manager Tongheng Investment. “No matter how much it invests in AI hardware, it will likely be outmaneuvered by competitors in tech innovation.” Its Hong Kong shares fell as much as 10.5% but pared losses in the afternoon to trade in line with the discount offered.
The sale of 710 million ordinary shares is equivalent to 3.6% of enlarged total shares outstanding.
It drew strong demand, attracting $28 billion of orders, including $6 billion from long-only and sovereign investors, three people with knowledge of the matter said.
About 40% of the book will go to long-only and sovereign investors, including major sovereign wealth funds in Europe, Asia and the Middle East, two of the people said.
Investors included the Qatar Investment Authority (QIA), Norway’s Norges wealth fund and Hillhouse, according to one person.
Alibaba, Hillhouse, QIA and Norges did not immediately respond to requests for comment.
Alibaba chairman Joe Tsai bought 720,000 Hong Kong shares at an average price of HK$112 apiece, for about HK$80 million in aggregate, while Eddie Wu, the group’s chief executive, bought 350,000 Hong Kong shares at an average price of HK$111.6 per share, totalling HK$40 million, according to the group’s stock exchange disclosures later on Monday.
