Alibaba’s Cainiao files for US$1 billion IPO, helping Hong Kong to land biggest listing since August 2022
- The logistics company’s plan to sell US$1 billion shares would be second only to the recent US$5 billion listing of SoftBank-owned chip maker Arm
- It would also be the city’s first billion-dollar listing since China Tourism Group Duty Free’s US$2.3 billion deal in August 2022
Cainiao Smart Logistics Network has applied to raise funds in Hong Kong in what is widely expected to be the city’s second-largest initial public offering (IPO) this year, as the first of Alibaba Group Holding’s six spin-off companies tests the appetite for new listings in Asia’s third-biggest capital market.
Cainiao has submitted its A1 filing to the Hong Kong stock exchange, Alibaba said in an exchange filing in Hong Kong.
The company is aiming to raise at least US$1 billion, subject to market conditions, according to sources. Upon completion of the proposed spin-off, Alibaba will continue to hold over 50 per cent of Cainiao, retaining it as a subsidiary. Alibaba holds about 69.54 per cent of Cainiao as of Tuesday.
The filing by Hangzhou-based Cainiao comes at a crucial time for Hong Kong’s stock market, as its benchmark Hang Seng Index struggles to claw its way out of this year’s 11.7 per cent slump. Downbeat sentiment has kept start-ups away from new listings in 2023.
IPOs in the city will drop 14 per cent in deal volume and 61 per cent in value through the first three quarters of the year, compared with the same period in 2022, according to an estimate by Deloitte. The consulting firm expects a total of 44 IPOs to garner an estimated HK$24.7 billion, versus 51 deals that raised HK$64 billion in the same period last year.
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Established in 2013, Cainiao has ballooned into a 100 billion yuan (US$13.7 billion) behemoth and one of China’s largest so-called unicorns, as private companies with more than US$1 billion in valuation are called.
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Cainiao’s total revenue, before inter-segment elimination, which includes revenue from services provided to other Alibaba businesses, rose 16 per cent in the 2023 financial year to 77.51 billion yuan, earning 72 per cent of the sales from external customers.
For the quarter ended June 30, Cainiao’s revenue grew 34 per cent to 23.2 billion yuan, primarily driven by growth in international fulfilment and domestic consumer logistics.
The courier handled more than 4 million cross-border parcels on a daily basis in 2023.
Logistics has played a vital role in China’s e-commerce development, Tsai said at Cainiao’s Global Smart Logistics Summit, held in Hangzhou in June.
“Consumption remains the most important driving force for economic development, [and] online retail is one of the main consumption scenarios,” he said in his first public remarks since taking charge of Cainiao. “Alibaba hopes to continue promoting the economy through consumption.”
The company will also seek to improve efficiency through use of artificial intelligence technologies, he said.
Moves that Cainiao has made this year, including acquiring a stake in a competitor and expanding its express delivery services, can be seen as preparation for the IPO, said Mo Daiqing, a senior analyst at Chinese e-commerce research institute 100ec.
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“Its ambition speaks for itself,” Mo said. “Cainiao had acquired 25 per cent shares of STO Express, obviously in preparation for its listing.”
Citic Securities, Citigroup and JPMorgan Chase are the joint sponsors of the IPO. Earlier this year, China International Capital Corp dropped out of the deal, given a conflict of interests as it is serving as a joint sponsor of J&T Global Express, another logistics firm that is seeking a Hong Kong listing.
Separately, Alibaba is putting the Hong Kong IPO of its grocery chain, Freshippo, on the back burner amid weak sentiment for consumer stocks in China, according to a Bloomberg report earlier this month.
