Alibaba Group Holding Ltd (NYSE: BABA) is set for a primary listing in the Hong Kong exchange on top of its listing in New york. The Chinese tech giant already had a secondary listing in Hong Kong in 2019.
Alibaba set for primary listing in Hong Kong
This comes as time runs out for Beijing and Washington to enter an agreement to avoid the massive delisting of Chinese stocks from the US exchange. Most regulations apply to businesses from their first listing—in Alibaba’s case, New York—so having an additional primary listing could raise the expense of compliance. But in comparison to the imminent risk of delisting itself, the issue is trivial.
Businesses whose auditors cannot be examined by US regulators for three financial years in a row would be delisted, according to a US legislation that went into force last year. The Securities and Exchange Commission has already designated well over 150 Chinese firms as potentially being barred from trading on American markets as early as 2024. A year might be cut off the process thanks to reforms that U lawmakers are recommending. Alibaba is still not yet on the blacklist, but once it releases its 2021 yearly accounts this week, it shall possibly be added soon.
Shift in the primary listing to generate $16 billion in capital
By shifting its primary listing to Hong Kong, Alibaba could attract around $16 billion in the Chinese capital, which will boost the stock that is struggling to bottom out. In addition, the action opens the door for the world’s largest online retailer to be integrated into the city’s trading relationships with mainland bourses, enabling fresh cash injection. According to Goldman Sachs Group Inc., Chinese investors own about 7% of the companies mentioned in the connections, indicating an influx of $16B to Alibaba over the following several years.
These expectations come at a good moment for Alibaba, whose shares are still down over 60% from their peak in October 2020 and whose tiny periods of a rebound this year have not endured due to regulatory concerns.