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Hong Kong Secondary Share Listing Yields $12.9 Billion For Alibaba

Hong Kong Secondary Share Listing Yields $12.9 Billion For Alibaba
A world’s highest ever amount for a cross-border secondary share sale was achieved by the Chinese e-commerce giant Alibaba with its landmark listing in Hong Kong generating $12.9 billion. This was also the highest for Hong Kong for nine years.  
Hong Kong, which has been witnessing anti-government protests for more than five months now, will view this deal as a boost to its stature as the financial hub of Asia.
Share were priced by the company at HK$176 each, a discount of 2.9% to its New York closing price, Alibaba said in a statement. This means that the Chinese firm will be able to raise at least HK$88 billion ($11.3 billion). The number 8 is also symbolically important as it is closely related to prosperity and good fortune according to Chinese culture. Moreover, the stock code 9988 for its listing has also been chosen by Alibaba which, according to Chinese beliefs, combines two of the luckiest numbers which together are strongest symbols of long-term prosperity,
If a so-called ‘greenshoe’ over-allotment option were exercised, the total raised from the deal could eventually reach $12.9 billion.
 “I was expecting it to be done at around 4%-5% so this is about right,” said Sumeet Singh, head of research at Aequitas and who publishes on research website SmartKarma. “The deal represents just about 4.4 days of three-month average daily value traded and hence, relatively it’s not a big deal for a stock of Alibaba’s size.”
This year that has been a rush to sell shares on stock exchanges towards the end of the year. For example, the largest ever public listing target is being expected by Saudi Arabia’s oil giant Saudi Aramco when it put up a small portion of its company stocks for sale to the public next month through initial public offering.  It is expected that of Aramco is able to cut the deal at that upper limit of its announced range of share price, it would be able to raise as much as $25.6 billion which would value the company at $1.7 trillion.
The Alibaba deal has been welcomed by Hong Kong’s army of small investors as they subscribed for 40 times the shares they were originally allotted, said reports quoting sources with knowledge of the matter. And according to Dealogic data, this would be the heaviest oversubscription rate for any multi-billion dollar share sale in Hong Kong in over four years.
No comments from Alibaba were available.
Compared to the earlier announced 2.5 per cent, about 10 per cent of the deal will now be taken up by retail investors. A ‘clawback’ system is used in Hong Kong according to which the allotted share for small investors can be increased if there is a heavy oversubscription from them. These numbers translate to an amount of $11 billion as have been put up collectively by the retail investors as they tried hard to own shares of the Chinese e-commerce giant.

Christopher J. Mitchell

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