Key Highlights
- The Chinese e-commerce giant issued 710 million fresh shares at HK$112.70 apiece, securing HK$80 billion ($10.21 billion) in capital
- This marks Hong Kong’s largest primary follow-on stock offering on record
- Proceeds are earmarked for artificial intelligence infrastructure expansion, covering semiconductors, computing centers, and machine learning models
- Investor Michael Burry has stated BABA must decline an additional 50% from current prices before he would re-establish a position
- Analysts maintain a Strong Buy rating with a consensus price target of $185.67, suggesting 55.6% potential upside
The Chinese technology conglomerate completed a significant capital raise by selling 710 million new shares at HK$112.70 per unit, generating HK$80 billion ($10.21 billion) and triggering an 8% decline in its Hong Kong-listed shares during Monday morning trading. The American depositary receipts also retreated over 3% in pre-market sessions.
Alibaba Group Holding Limited, BABA
The offering price represented an 8.4% markdown from Friday’s closing quotation in Hong Kong. Such substantial discounts typically trigger negative market reactions, and this instance followed the expected pattern.
This transaction establishes a new benchmark as the biggest primary follow-on share issuance by any company trading in Hong Kong. On a worldwide scale, it stands as 2025’s third-largest such capital raise, trailing only those executed by Alphabet and Intel.
Alibaba has announced the capital will finance its comprehensive artificial intelligence technology stack. The investment encompasses semiconductor development, advanced AI algorithms, and physical infrastructure buildout.
The new shares represent approximately 3.7% growth in Alibaba’s outstanding share base, intensifying existing shareholder apprehensions regarding equity dilution.
Burry Abandons Position
Prominent investor Michael Burry, celebrated for correctly forecasting the 2008 housing crisis, has already reallocated his Alibaba holdings into rival JD.com. He indicated his original intention was to shift capital back into BABA within one to two months, but the equity issuance derailed those plans.
“Diluting shareholders through new issuances appears to be its new operating model,” Burry commented. He specified BABA would require a roughly 50% decline from present valuations before he would contemplate reestablishing exposure.
Burry’s reservations extend beyond simple dilution mathematics. He’s also expressing skepticism about whether Alibaba can achieve compelling investment returns from its artificial intelligence expenditures.
Recent Financial Results Compound Concerns
The capital raise followed by seven days Alibaba’s release of its fiscal second-quarter financial performance. Top-line revenue advanced 9% year-over-year to $39.64 billion.
However, bottom-line metrics deteriorated significantly. Non-GAAP diluted earnings per American depositary share contracted 42% to $1.26. Adjusted EBITA declined 30%, while operational income plummeted 57%.
Capital expenditures surged 75% to reach $10.07 billion during the quarter. Management disclosed the company has already consumed approximately half of its three-year capital investment allocation.
The company accelerated its anticipated timeline for achieving positive returns on AI investments, now projecting breakeven in two and a half years instead of the previously stated three-year period, attributing the revision to explosive growth in demand for AI-powered services.
Quarterly net income tumbled 75% compared to the prior-year period, predominantly attributable to aggressive AI-focused capital deployment.
In the previous week, Alibaba Cloud inaugurated its third computing facility in South Korea, expanding its worldwide footprint to 104 availability zones spanning 30 geographic regions. This expansion aligns with the October announcement committing 380 billion yuan ($56.54 billion) in investments across a three-year horizon.
Despite recent volatility, Wall Street analysts continue assigning BABA a Strong Buy consensus rating, supported by 10 Buy recommendations issued within the past three months. The average analyst price target stands at $185.67, indicating approximately 55.6% appreciation potential from current trading levels.
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