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Explainer | What is fungibility, and what’s the big deal with Alibaba’s fungible shares on New York and Hong Kong exchanges?
- One American Depositary Share (ADS) of Alibaba (BABA) on the New York exchange is equivalent to eight Alibaba shares (9988) on the Hong Kong exchange
- A fully fungible stock can be bought or sold in one marketplace to be converted or sold on another, and pricing on the two are unlikely to diverge too much from each other
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Alibaba Group Holding successfully raised as much as US$13 billion this week in Hong Kong, in the world’s largest initial public offering (IPO) this year.
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The Hong Kong secondary listing under the stock code 9988, the first of its kind on the exchange, adds to the technology giant’s American Depositary Shares (ADSs) listed in New York (BABA) since 2014. Alibaba owns South China Morning Post.
Here’s an explainer for how the two fully fungible securities relate to each other:
Q: What does “fully fungible” mean?
Fungibility is the property of a good, typically a commodity such as oil, wheat or timber, whose individual units are essentially interchangeable, and each of its parts is indistinguishable from another.
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A fully fungible stock can be bought or sold in one marketplace to be converted or sold on another, and pricing on the two are unlikely to diverge too much from each other.
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