admin Alibaba shareholders voted overwhelmingly in favor of a stock split that the e-commerce giant said could help with further fundraising activities.
That stock split, which must come into effect before July 15, 2020, will see one ordinary share split into eight. That would mean the current number of ordinary shares — which stands at 4 billion — will increase to 32 billion. The vote took place at Alibaba’s annual general meeting late on Monday.
It comes as Alibaba is reportedly looking into an initial public offering (IPO) in Hong Kong which could raise as much as $20 billion.
In the stock split proposal, which was released last month, Alibaba said the move would boost the number of shares at a lower price, but importantly also “increase flexibility in the Company’s capital raising activities, including the issuance of new shares.”
That appears to be a nod toward a potential secondary listing in Hong Kong. Alibaba is already listed in New York after it went public in 2014. However, the tech giant declined to comment on reports of a Hong Kong listing.
Alibaba chose New York over Hong Kong in 2014 because the latter’s rules could not accommodate the Chinese company’s dual-class share structure which allow for weighted voting rights and give company founders and insiders more control. Hong Kong Exchanges and Clearing, the company that runs the stock exchange, recently reformed those rules, paving the way for Alibaba’s secondary listing.
There are several reasons that companies carry out stock splits. One is to increase the number of shares with the hope of attracting new investors. Another is to lower the price of each share if a company feels that it has become too high.
When Alibaba went public in the U.S. in 2014, it priced its shares at $68 a piece. Alibaba shares closed above $173 on Monday.
Alibaba doesn’t necessarily need the cash from the listing but analysts said it could give it a boost to invest in new areas.
“As it relates to their listing, clearly, they’re very cash rich company but this does give them presence in the region from a listings standpoint and gives them capital that they can put to good use,” Joseph Berger, CEO of Pacific Epoch, told on Tuesday
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