“Alibaba’s Reduction of Bilibili and Xiaopeng Stocks Leads to Sharp Declines, Dragging Down Hong Kong Stocks”

By admin Mar 22, 2024

The Hong Kong stock market experienced a significant decline on Friday (March 22), with the Hang Seng Index dropping by 3% at midday. Technology and automotive stocks saw widespread declines, with Bilibili (09626-HK) and XPeng Motors (09868-HK) leading the losses, falling by over 8% and nearly 9%, respectively. Both stocks were affected by Alibaba’s (09988-HK) reduction in holdings.

Reports indicated that Alibaba sold 30.85 million shares of Bilibili’s ADR at $11.6 per share, representing a discount of approximately 5.54% compared to Bilibili ADR’s closing price of $12.28 on Wednesday (March 20). Bilibili plummeted by 8.4% in the Hong Kong stock market on Friday, marking its largest drop in two months.

According to reports citing sources from Alibaba, “This sale is mainly based on Alibaba’s capital management goals and will not affect the business cooperation between the two parties. Alibaba’s related businesses will continue to strengthen cooperation with Bilibili in various fields.”

For over a decade, Alibaba has been one of China’s most prolific investors, covering a wide range of investments from retailers to startups. However, the company began steadily reducing its shareholdings last year. Alibaba has reduced its stakes in electric car manufacturer XPeng Motors, AI company SenseTime, and the Hong Kong-listed ride-sharing company GogoX Holdings Ltd.

The primary reason for these actions is Alibaba’s ongoing restructuring efforts aimed at refocusing its vast business empire on core retail and technology-oriented areas from cloud to artificial intelligence. Alibaba has led significant funding rounds for at least two Chinese AI startups this year while selling off more stakes in mature companies, indicating its intention to secure a position in a potentially transformative sector.

In addition to capital investments, Alibaba has initiated one of China’s largest shareholder return programs. The company has established a separate entity to manage its global asset portfolio, which analysts believe is a tool for selling its holdings. Alibaba remains a significant shareholder in prominent companies like Weibo and Gaoxin Retail Group Ltd. According to Bloomberg, Alibaba is considering selling its Intime Department Store division.

Vey-Sern Ling, Managing Director at Union Bancaire Privee, stated that Alibaba’s recent actions are not surprising, as the management has discussed realigning the focus of core businesses several times.

Alibaba became a major shareholder of Bilibili in February 2019. Apart from direct economic benefits, Alibaba is also a significant advertiser on Bilibili’s video streaming platform. According to Bilibili’s latest annual report, the two companies have been collaborating on content creation since 2018.

Prior to this, XPeng Motors submitted a 144 document to the U.S. Securities and Exchange Commission, showing that Alibaba’s affiliate, Taobao China Holdings Limited, sold a total of 33 million American Depositary Shares (ADS) of XPeng Motors for approximately $314 million, with the transaction price ranging between $9.6 and $9.75 per share, below market price.

By admin

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