Amidst a digital tempest, Alibaba Group (NYSE:BABA) seems to be contemplating a hefty $5 billion convertible bond sale following JD.com’s (NASDAQ:JD) recent $1.75 billion offering, as revealed in an exclusive Bloomberg report. The tech giant from the East has reportedly engaged in discussions with investment banks regarding the issuance of bonds convertible into US-listed stock.
The Storm Clouds Gather: Alibaba’s Capital Raising Saga
The imminent bond sale serves a dual purpose – to fuel share repurchases and foster growth. Speculations suggest the offering might materialize within the week, although a definitive verdict remains pending.
Alibaba finds itself in dire need of capital infusion to fortify its prime domains, especially in commerce and cloud services, which have taken a hit in market standing owing to regulatory storms and internal conundrums. The conglomerate is slashing prices on its cloud and AI services while redoubling its investments in AI technology. Earlier this year, Alibaba augmented its share repurchase initiative by $25 billion, etching a new chapter in China’s corporate history with one of the most extensive buyback programs.
Moreover, the fiscal cataclysm ensued in Alibaba’s Fiscal Q4 as net income plummeted by a staggering 86% year-over-year to RMB3.3 billion, predominantly attributed to unexplained write-downs due to losses on its public holdings, which include the likes of AI gem SenseTime, along with escalated spending to combat its adversaries.
Despite the looming clouds, analysts hold a bullish stance on BABA stock, comprising a Strong Buy consensus with 14 Buys against three Holds. Year-to-date, BABA has seen an uptick of over 6%, while the average price target of $103.46 harbors an upside potential of 25.1% from current trading levels.
