Alibaba Cancels Plans for the Cainiao IPO and Offers To Purchase Stake For Up To $3.75 Billion

Due to unfavourable market circumstances, China’s massive conglomerate Alibaba Group Holding Ltd. has chosen to delay the purchase, according to Bloomberg.

The Cainiao logistics arm’s IPO had the potential to raise over $1 billion. According to the article, Alibaba may decide to relaunch the IPO after the markets have recovered.

Plan for Acquiring Stock in Alibaba
Following the cancellation of its initial public offering (IPO) plan, Alibaba Group said that it will make a $3.75 billion bid to purchase the 36% of Cainiao that it does not already control. Reversing its reorganisation plan, Alibaba, which owns around 64% of Cainiao, said that it will make a bid to buy the remaining shares.

“Given the strategic importance of Cainiao to Alibaba and the significant long-term opportunity we see in building out a global logistics network, we believe this is an appropriate time to double down,” stated Joe Tsai, chairman of Alibaba Group. He also mentioned in a call with analysts that regulatory concerns were not a factor in the decision to scrap Cainiao’s initial public offering.

Alibaba Regarding Cainiao IPO
All of Alibaba’s scheduled initial public offerings, including Cainiao’s, Tsai said, “were subject to market conditions.”

On the call on Tuesday, he said, “The overall environment for doing capital market transactions in order to unlock value for shareholders is just not there in this part of the world.” Reuters said, “It doesn’t make sense for us to grind into these capital market deals.”

Alibaba Cancels Its IPO: Why?
The Hong Kong initial public offering (IPO) market had a downturn in 2023; out of 73 businesses listed, only HK$46.3 billion ($5.92 billion) could be raised, a 56% decrease from 2022.

Rejecting the IPO was due in part to a discrepancy between the company’s expected value and that of possible investors, according to Reuters’ sources.

Alibaba, on the other hand, remained silent on any mismatch in valuation; nevertheless, Tsai said in his Tuesday speech that Cainiao was valued at $10.3 billion by Alibaba’s offer to minority shareholders.

Alibaba’s Proposal To Owners
Alibaba has made an offer to Cainiao’s minority owners to buy back all of the existing shares for $0.62 a share, which may be completed by June or July.

Alibaba’s Reorganisation
In the largest change to its 24-year existence, Alibaba is already dividing into six divisions, each with its own CEO and board, and using the holding company management model known as “1+6+N.” Additionally, it had abandoned the spinoff of its cloud business.