Alibaba Group Holding Limited (BABA) has announced plans to raise HK$80 billion (approximately $10.2 billion) through a share placement in Hong Kong, its biggest capital raise in years and, if completed, the largest primary follow-on offering ever undertaken by a Hong Kong-listed company.

Under the terms of the placement, Alibaba will sell 710 million ordinary shares at HK$112.70 each, a price that represents a 3.6% discount to the stock's most recent closing level. Because the shares are newly issued rather than sold by existing holders, the deal expands Alibaba's outstanding share count and spreads future earnings across a larger base — the dilution effect investors weigh when a company prices a discounted placement. The transaction is structured as an offshore deal and was not registered under U.S. securities law, which means American investors cannot participate. Instead, the offering targets non-U.S. investors through Alibaba's Hong Kong listing, which trades on the HKEX under the tickers 9988 and 89988, rather than through the company's New York presence. Alibaba has been dual-primary listed in Hong Kong since converting from a secondary listing in August 2024, the status that enables it to conduct a primary follow-on of this kind in the city. Morgan Stanley, HSBC, UBS and China International Capital Corp. are acting as joint bookrunners on the deal.

According to Alibaba, every dollar raised will be directed toward the company's "full stack" AI push. That effort covers semiconductors, computing infrastructure and the development and deployment of AI models; in industry terms, a full-stack strategy means building across multiple layers of the AI supply chain rather than depending on outside vendors for any one of them. The company did not provide a breakdown of how it plans to split spending across those categories.

Offering Demand Was Strong

Investor appetite proved healthy. The offering became oversubscribed, prompting Alibaba to increase its size as a result, and sovereign wealth funds were among those expressing interest, according to Reuters sources.

If completed, the placement would be the largest primary follow-on offering ever undertaken by a Hong Kong-listed company. It would also rank as the world's third-largest primary follow-on share sale this year, behind only Alphabet and Intel — a ranking that places Alibaba in a 2025 follow-on class otherwise occupied by two of the world's most established technology companies. For the Hong Kong exchange, a completed deal of this size would set a fresh benchmark for the city's capacity to anchor mega-cap primary offerings.

AI Spending Weighs on Earnings

The new fundraising adds to what is already a heavy capital expenditure cycle. Alibaba said last week that it had already spent nearly half of its three-year capex program, and that spending is now showing up in the income statement. Net profit fell 75% year-over-year in the April-to-June quarter as AI-related capital spending rose.

On the upside, Alibaba said the expected payback period for its AI investments is on track to shorten to 2.5 years, down from three years, supported by rising demand. CEO Eddie Wu has said the company needs to build enough computing capacity before it can capture future growth opportunities. That payback timeline is management guidance rather than a guaranteed outcome, and it leaves two concrete markers for the quarters ahead: whether the payback period continues to shorten toward the 2.5-year target, and how quickly the remaining half of the three-year capex program is deployed. Once the new shares are issued, per-share earnings will also be measured across a larger share base.

BABA's American depositary receipt fell 8.57% on Sunday following the announcement. The decline reflects investor caution around both the earnings dilution and the scale of the capital commitment, coming as the raise arrives while net profit is already under pressure from rising AI capital spending.

Source: CoinCentral