Alibaba’s logistics division eyes up to $2 billion IPO

The Alibaba logistics division plans to raise up to $2 billion through a Hong Kong listing that will likely happen early next year. The move has raised hopes for a revival in the Hong Kong capital markets.

Alibaba plans an up to $2 billion IPO

The plan by Cainiao Network Technology to have an initial public offering (IPO) comes after Alibaba announced it would divide its business into six divisions. At the time, Alibaba said most of the new divisions would explore new capital raises and market debuts to fund future growth.

Cainiao is already underway with plans for the IPO, and it plans to raise between $1 billion and $2 billion in Hong Kong. The IPO will likely be launched in early 2024. However, sources close to the company have said that the plans for this are yet to be finalized and that some changes could be seen in the future regarding this new offering.

Alibaba is one of the largest e-commerce platforms globally. The marketplace acts as a platform where buyers and sellers have, in the past secured stakes in leading express delivery players to guarantee that the company has access to reliable services.

Alibaba co-founded Cainiao in 2013 alongside firms such as Intime Group, Fosun Group, and several logistic companies. Alibaba secured control of Cainiao four years after it was founded and increased its stake in the company from 47% to 67%.

Cainiao is a software company that shares data with warehouses, carriers, and logistic companies. The company reported revenues of 42 billion yuan during the nine months that ended in December. The revenues have also increased by 22% year-on-year, and they currently account for 6% of the total revenue reported by Alibaba Group.

The IPO plan for this logistics division is the first among Alibaba’s expected capital raisings for the spun-off units. The ecommerce company has been working on its largest restructuring plan since its inception.

The analysts have opined that the split could reduce scrutiny over the rapidly growing business empire owned by Jack Ma. Ma has been targeted by local regulators as part of a broader crackdown on private enterprises since late 2020. The other five units that Alibaba will launch include Cloud Intelligence, Digital Media and Entertainment, Global Digital Commerce, and Local Services.

Prospects for an IPO

According to the dealmakers, the potential IPO by Cainiao is expected to be followed by launches across some of the other units owned by Alibaba in the short term. The move would also help to resuscitate the fundraising activities in Hong Kong.

Alibaba has not mentioned any potential listing venues for the other units. However, the other listings will likely be in Hong Kong because of the proximity to the home market for this group.

The IPOs in Hong Kong have raised around $1.5 billion since the start of the year, which is a notable increase from the $1.2 billion raised during the same period in 2022. The former head of the Asia-Pacific capital markets business at the Bank of America said that leading global investors would target the Alibaba spin-offs.