Alibaba Group has raised HK$80 billion, or about $10.21 billion, through a new share sale in Hong Kong to fund its expansion in artificial intelligence and the infrastructure behind it. It is the largest follow-on offering the exchange has seen and the third-largest globally this year. Investors responded by selling: the stock fell as much as 10.5% in Hong Kong trading.
A Discount the Market Did Not Expect
The new shares were priced at HK$112.70 apiece, a discount of 8.4%. Charles Wang, chairman of Shenzhen Dragon Pacific, described the sale as short-term negative news because it dilutes existing shareholders. Jason Chan, a strategist at Bank of East Asia, said both the size of the offering and the discount attached to it caught the market by surprise.
A 380 Billion Yuan Spending Plan
The raise sits inside a capital spending programme of 380 billion yuan, roughly $56.54 billion, spread over three years and directed at AI infrastructure. Alibaba has already spent about half of that budget, and has shortened its estimated payback period on the investment from three years to two and a half.
The build-out is weighing on earnings. Quarterly net profit fell 75% year on year. Geographically, the company opened its third data centre in South Korea, taking its network to 104 availability zones.
Selling Spread Across Chinese Equities
The pressure was not confined to Alibaba. The Hang Seng Index dropped 2.1%, the technology index lost 3.8%, and the AI index shed more than 5% — a sign of renewed investor concern about the escalating cost of the AI race and what it does to corporate profits.
The spending also carries a strategic dimension in the wider technology competition between China and the United States. In currency markets, the yuan traded near 6.7238 to the dollar, up 4% since the start of the year.
This story was produced in the newsroom from the disclosed sources named above.
