Alibaba’s US$4.5 billion convertible bond sale ‘oversubscribed’, as tech giant builds war chest to fund share buy-backs
- The firm expects to raise US$4.5 billion from initial sales, while giving purchasers the option to buy up to an additional US$500 million of notes
- Alibaba chairman Joe Tsai and CEO Eddie Wu Yongming declare e-commerce and cloud as core businesses in their first letter to shareholders
The Hangzhou-based firm, which owns the South China Morning Post, said it expects to raise close to US$4.5 billion from initial sales, while giving purchasers the option to buy up to an additional US$500 million of notes, according to filings made to the Hong Kong and New York stock exchanges on Friday and Thursday.
The offering, which is Asia’s largest-ever convertible bond transaction and the world’s biggest since 2008, has received positive market response and was oversubscribed multiple times, according to people familiar with the matter, who requested anonymity because the information is private.
Alibaba’s latest move demonstrates the management’s confidence in the company’s fundamentals, according to one of the sources. The firm chose to issue convertible bonds rather than US-dollar bonds because they entail lower financing costs, and conversion will only be triggered after the price of Alibaba’s American depositary shares (ADS) reaches US$161.6, the person said.
The company announced in the first quarter it had spent US$4.8 billion to buy 524 million ordinary shares, equivalent to 65 million ADS, marking its most aggressive stock buy-back since 2021. It repurchased a total of US$12.5 billion shares in its financial year ended March.
On Thursday, Alibaba chairman Joe Tsai and chief executive Eddie Wu Yongming sent out their first letter to shareholders since taking the reins from Daniel Zhang Yong last September, saying the company is returning to a start-up mindset.
