Alibaba shares in Hong Kong fall after $10.2 billion share placement for AI
Alibaba shares listed in Hong Kong fell at the start of trading after the Chinese company completed an 80 billion Hong Kong dollar, or $10.21 billion, share placement. Alibaba plans to use the funds raised for artificial intelligence development and the expansion of related infrastructure, Channel NewsAsia reports, citing Reuters.
Market reaction
In early trading in Hong Kong, Alibaba shares fell by as much as 10%, to 110.10 Hong Kong dollars per share. The placement price was set at 112.70 Hong Kong dollars per share, 8.4% below Friday’s closing price.
Charles Wang, chairman of Shenzhen Dragon Pacific Capital Management, called the placement negative news in the short term because it dilutes the holdings of existing shareholders. According to him, investors generally view major capital expenditures negatively, although such investments may be beneficial in the long term.
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AI investments
The deal became the largest follow-on share placement in history by a Hong Kong-listed company and the third-largest globally this year after offerings by Alphabet and Intel.
A week before the placement, Alibaba released its quarterly results and said it had already spent nearly half of the funds allocated under its three-year capital expenditure plan. The company reduced the projected payback period for AI investments from three years to two and a half years, citing growing demand for artificial intelligence services.
Alibaba’s quarterly net profit fell 75% year-on-year, mainly due to AI-related expenses. Last week, Alibaba Cloud opened its third data center in South Korea, while its network reached 104 availability zones across 30 regions. In October, the company announced plans to invest 380 billion yuan, or $56.54 billion, in AI infrastructure over three years.
