Alibaba to Raise USD 3.2 Billion for Cloud, International Growth
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- 9 hours ago
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Chinese e-commerce leader Alibaba Group announced plans on Thursday to raise USD 3.2 billion through the sale of a zero-coupon convertible bond. The funds are designated for international expansion and strengthening its cloud computing division.
Nearly 80% of the proceeds will be used to expand data centres, upgrade technology, and improve services for cloud solutions. The remaining funds will enhance market presence and efficiency in the company’s e-commerce ventures.
The bond will mature on Sept. 15, 2032, and convert into U.S.-listed shares. Alibaba will offer the bond with a 27.5% to 32.5% conversion premium above its U.S.-listed share price.
This issuance represents the largest convertible bond of its kind this year, according to Dealogic data. It surpasses DoorDash’s USD 2.75 billion deal completed in May.
Alibaba, a major investor in artificial intelligence, has pledged USD 53.37 billion (380 billion yuan) over three years for AI initiatives. Chief Executive Officer Eddie Wu commented, "Our investments in AI have begun to yield tangible results."
Mr. Wu added in an earnings call that the company sees "an increasingly clear path for AI to drive Alibaba's robust growth." The firm reported strong cloud revenue growth last month, with AI identified as key to expansion, despite wider operations missing revenue estimates.
The company's Hong Kong-listed shares were trading up 2.3% at HK$146.1 on Thursday, having earlier fallen by as much as 2.6%. Its New York-listed stock declined 2.2% on Wednesday.
Year to date, Alibaba's Hong Kong stock has risen 71.6%, while its U.S. stock has climbed 71.1%.
Alibaba previously raised USD 1.5 billion in July through an exchangeable bond and USD 5 billion in May of last year via a convertible bond.
On Thursday, China Pacific Insurance also announced a zero-coupon convertible bond, aiming to raise $2.00 billion (HKD 15.55 billion).
Convertible bonds have gained popularity in Hong Kong's equity capital markets over the past six months. These bonds offer the prospect of equity gain, with some paying a coupon, and their principal is repaid at maturity if the option to convert into shares is not exercised.
The Asia-Pacific region has seen USD 27.8 billion worth of convertible bonds issued this year. This compares to USD 28.7 billion issued during the same period last year, marking the strongest period in three years.
Alibaba plans to raise USD 3.2 billion through a zero-coupon convertible bond.
Funds will primarily support cloud computing expansion and technology upgrades, with additional investment in e-commerce.
The bond, maturing on Sept. 15, 2032, is the largest of its type this year.
Source: REUTERS