Alibaba Group Holding Ltd. (NYSE:BABA) plans to raise HK$80 billion (US$10.20 billion) through a Hong Kong share offering to fund artificial intelligence development, Reuters reported on Sunday.
This deal will be the largest secondary initial public offering ever undertaken by a Hong Kong-listed company, and will rank third globally among the largest secondary initial public offerings of shares this year, behind Alphabet Inc. (NASDAQ:GOOGL) and Intel Group (NASDAQ:INTC).
Alibaba plans to sell 710 million ordinary shares at HK$112.70 per share, according to a prospectus seen by Reuters. This price represents a 3.6% discount to the last closing price of the stock.
The Chinese e-commerce and cloud computing group announced that it will dedicate all net proceeds to enhancing its capabilities in integrated artificial intelligence, including semiconductors, computing infrastructure, and the development and deployment of AI models.
Alibaba did not disclose details of the planned spending distribution across these categories.
Reuters, citing sources familiar with the deal, reported that investor demand for the offering was strong, including interest from sovereign wealth funds. The sources added that the company increased the size of the offering after demand exceeded the available supply.
Morgan Stanley (NYSE:MS), HSBC Holdings PLC (NYSE:HSBC), UBS Group AG (NYSE:UBS) and China International Capital Corp. jointly manage the order book.
The offering was structured as an offshore transaction and was not registered under U.S. securities laws, thus preventing U.S. investors from participating.
Alibaba announced last week that it had spent nearly half of its three-year capital expenditure program, noting that the expected payback period for investments in artificial intelligence is on track to decrease from three years to 2.5 years, supported by increasing demand.
CEO Eddie Wu stressed that Alibaba needs to build sufficient computing power before it can seize future growth opportunities.
Massive investments have weighed on short-term profits, with Alibaba's net profit falling 75% year-on-year during the April-June quarter, amid escalating capital spending related to artificial intelligence.
This fundraising effort places Alibaba among the ranks of global technology companies that are allocating huge sums to semiconductors, data centers and cloud infrastructure, amid escalating competition in the field of artificial intelligence.
