Alibaba considering convertible bond sale, following JD.com

Alibaba Group Holding is considering selling convertible bonds to raise about US$5 billion, people familiar with the matter said, following a US$1.75 billion offering by rival Chinese online retailer JD.com this week.

Alibaba has spoken with investment banks about selling bonds that can be converted into US-listed stock, the people said, asking not to be identified discussing private information. The aim is to fund share repurchases and growth, the people said. 

An offering could come as soon as this week, though no final decisions have been made, the people said.

Alibaba’s Hong Kong-listed shares dropped as much as 6.6 per cent, the biggest intraday loss since Feb 8.

Alibaba needs capital to invest in its core businesses of e-commerce and the cloud, both of which have bled market share during a crackdown on the sector by Chinese authorities and subsequent internal turmoil. The company is leading the way in cutting prices on cloud and artificial intelligence services, while also starting to ramp up bets in AI, a hotbed of global investment activity. 

A representative for Alibaba didn’t respond to requests seeking comment.

Alibaba approved an expansion of a share buyback programme earlier this year, adding US$25 billion in stock repurchases – one of the largest-ever in China. 

The Chinese company’s American depositary receipts have fallen 6.6 per cent in the first three days of this week, trimming their year-to-date gain to 6.7 per cent and leaving Alibaba with a market value of just over US$200 billion. 

Alibaba’s latest quarterly net income tumbled 86 per cent from a year earlier after an unexplained writedown for losses in its publicly traded holdings, which range from AI firm SenseTime Group to brick-and-mortar chain Sun Art Retail Group. That came on top of heightened spending to ward off competitors.

JD.com’s convertible bonds are due in five years and have a coupon of 0.25 per cent. BLOOMBERG