Alibaba for paperless listing in break with Hong Kong norm

Alibaba’s planned $13.4 billion share sale will be Hong Kong’s first paperless stock market listing, a source with knowledge of the matter said, breaking with a long-held tradition of investors placing stock orders in bank branches.

Companies carrying out initial public offerings (IPOs) in Hong Kong have traditionally placed prospectuses in banks, which would often stay open late or over the weekend, and investors would fill out paper forms to place their stock orders.

Chinese e-commerce giant does not plan to print a paper copy of its 661-page prospectus, which it lodged with the Hong Kong Stock Exchange on Wednesday, said the source, who was not authorised to speak to the media and so declined to be named.

Investment bankers familiar with the Alibaba listing said the logistics of having investors queuing in or outside banks while protests unfolded nearby would have been difficult.

Alibaba is not expected to carry out an advertising campaign for the listing, but will tell potential retail shareholders, particularly the elderly, that the automation process will not lock them out of participating.

An Alibaba spokeswoman declined to comment.

The Hangzhou-based ecommerce giant will invite retail investors to subscribe for shares on Friday, with an initial allotment for them of 12.5 million shares, or 2.5% of the new stock to be issued, a term sheet seen by Reuters shows.

Alibaba’s prospectus showed the company plans to issue 500 million new shares and could raise up to $13.4 billion after the so-called over-allotment option is exercised.

The listing comes as Hang Seng index fell to a five-week low on Thursday, driven down by worsening sentiment in Hong Kong.

The decision by Alibaba to fully automate the retail subscription component of its deal comes as Hong Kong is gripped by violent civil unrest, which has shut shops in the financial district and on Thursday led the government to close schools.

Alibaba had planned a paperless deal when it considered a listing in Hong Kong over the summer. The listing was put on hold after the anti-government protests started to unfold and the city has since been gripped by worsening violence. The decision to go paperless was in line with Alibaba considering itself a leading e-commerce and digital platform, the source said.

An Alibaba report on environmental, social and corporate governance (ESG) last year said it was “mindful of the environmental effect of paper and plastic packaging as well as the carbon footprint of transport systems in logistics”.

Alibaba Group Chairman Daniel Zhang said Hong Kong’s “future is bright” as the ecommerce giant kicked off the retail campaign for its secondary listing in the city gripped by increasingly violent protests and recession.

In a first for the Asian financial hub, Alibaba said the listing would be fully automated and paperless to reflect its environmental standards, confirming an earlier Reuters story.

Investment bankers familiar with the listing however said the move avoided a potential publicity nightmare of investors queuing at banks to place stock orders while protests raged around them.

Four thousand people have been arrested in Hong Kong since June and the territory’s economy has sunk into recession for the first time in a decade as the anti-government demonstrations disrupt Business and deter tourists.

Zhang made no mention of the unrest in the chairman’s letter included in the company’s supplementary prospectus.

“Over the last few years, there have been many encouraging reforms in Hong Kong’s capital market. During this time of ongoing change, we continue to believe that the future of Hong Kong remains bright,” he wrote.

Hangzhou-based Alibaba is hoping to raise up to $13.4 billion in its Hong Kong listing and the shares are due to start trading on Nov.26. The retail price of the shares will be capped at HK$188 each. The share sale is set to be Hong Kong’s largest in more than nine years, and comes as Beijing seeks support from the semi-autonomous territory’s tycoons and entrepreneurs to maintain a sense of Business-as-usual in the face of more than five months of unrest.

Alibaba had originally considered a Hong Kong IPO in 2013, but ultimately chose New York after failing to gain approval from Hong Kong regulators for its unusual governance structure.

The institutional price will be finalised on Nov.20 following a book build which is underway for global investors.

In the retail component 12.5 million shares will be offered, which is 2.5% of the total deal, however, that could be increased to up to 50 million, or 10% of the total transaction.

Alibaba also has the option to exercise a so-called over-allotment option to add an extra 75 million shares to the deal.

Reuters