HONG KONG - Alibaba Group Holding called off an initial public offering (IPO) for its Cainiao logistics arm in Hong Kong, shelving a US$1 billion-plus (S$1.3 billion) deal in a surprise move that underscores its new approach toward rejuvenating a flagging e-commerce empire.
It is the second time Alibaba has nixed a high-profile debut for one of its main businesses, casting more uncertainty over a restructuring that began in 2023 and has switched tack since the abrupt departure of former chief executive officer Daniel Zhang.
From an initial plan of splitting the company into six standalone divisions that could independently raise capital, the objective now is to combine operations to drive the mainstay commerce arm, while selling off non-core assets such as stakes in social media platform Bilibili and electric vehicle (EV) maker Xpeng.
China’s e-commerce pioneer scrapped the much-anticipated debut as the country’s economic turmoil and regulatory uncertainty soured investors on Hong Kong IPOs. Chairman Joseph Tsai described the market as “pretty depressed” and said they wouldn’t have afforded Cainiao the kind of “patient capital” it needed to pull off a global expansion.
Alibaba, which owns 64 per cent of Cainiao, now plans to buy out all remaining stock held by investors and employees for US$3.75 billion, absorbing the fast-growing entity into its broader online retail operation.
Alibaba decided to “limit the distraction” of taking Cainiao public and instead reinvest in expanding a business that in recent quarters outperformed other divisions thanks to its international footprint.
“Given challenging IPO market conditions, it has become clear to us that taking Cainiao public now or in the foreseeable future would not be consistent with our group strategy,” Mr Tsai told analysts on March 26. “Nor would the achievable valuation be what we believe to be the strategic valuation of Cainiao at this point.”
Alibaba is still grappling with fundamental questions surrounding the Internet company Jack Ma founded two decades ago and built into China’s most valuable corporation, before the pandemic and a punishing antitrust crackdown by Beijing wiped out growth. It has since bled market share to rivals such as PDD Holdings and ByteDance. The company posted a lower-than-projected 5 per cent rise in December quarter revenue – well off the pace of previous years.
Ms Ivy Yang, founder of consultancy Wavelet Strategy and a former manager at Alibaba, said: “This is a surprising pivot as a few months ago, Alibaba was singing a different tune about the strategic importance of Cainiao.
“The decision to call off Cainiao’s IPO will further erode investor confidence in the Alibaba restructuring efforts, its ability to continue to create shareholder value, and the bigger question on whether an IPO is still an option for Alibaba Cloud.” BLOOMBERG
