The Hangzhou-based company, which also owns the South China Morning Post, said it plans to raise nearly $4.5 billion in the initial sale and give buyers the option to buy up to $500 million worth of bonds, according to filings with the Hong Kong and New York stock exchanges on Friday and Thursday.
The convertible bond offering is Asia's largest and the world's largest since 2008, and the market responded favorably, with the bond being oversubscribed in multiple rounds, said the people, who asked not to be identified as the information is private.
Alibaba's latest move signals management's confidence in the company's fundamentals, one of the people said. The company chose to issue convertible bonds rather than U.S. dollar bonds because of lower financing costs, and conversion will only occur after the price of Alibaba's American depositary shares (ADSs) reaches U.S.$161.6, the person said.
In the first quarter, the company said it would spend $4.8 billion to buy 524 million common shares (equivalent to 65 million ADSs), its most aggressive share buyback since 2021. The company repurchased a total of $12.5 billion worth of shares in the fiscal year ended March.
In their first letter to shareholders since taking over from Daniel Zhang Yong in September last year, Alibaba Chairman Tsai Ing-wen and Chief Executive Officer Wu Yongming said on Thursday the company would return to its startup mentality.
“Over the past 25 years, Alibaba has grown steadily but has also acquired the characteristics of a 'big corporation.'” The letter said, “Over the next decade, we intend to re-emerge as a startup, driven by entrepreneurial spirit, innovation and our mission to 'make it easy to do business anywhere.'”
The executives said Alibaba's domestic and international e-commerce arms — Taobao, Tmall Group and International Digital Commerce Group — now sit at the heart of the group's core e-commerce business, while other units such as Cainiao and on-demand delivery business Ele.me are expected to bring “synergies that will enhance the value of our e-commerce business”.
Alibaba also aims to become “a leading public cloud infrastructure and platform technology provider in China.”
The leaders also reiterated two strategic directions first announced by Wu when he took over: “User First” and “Focus on AI,” which will prioritize user experience in business strategy and product design to drive customer retention and repeat purchases.
“Each of our businesses has a vast number of use cases, all of which can unlock powerful value using AI applications. The adoption of AI will increase computing demand and drive the growth of Alibaba Cloud,” Tsai and Wu wrote. Alibaba aims to become “the leading public cloud infrastructure and platform technology provider in China,” they said.
The company will continue to invest with two objectives: to accelerate the growth of its core business and to maintain its leadership in foundational technologies and innovation, including artificial intelligence.
Management said the company is taking a “long-term view when making difficult decisions.”
“We think in 10-year cycles because the pace of development of technology companies typically goes through stages of investment, growth, harvest, profits, and inevitable decline,” they wrote.
