Alibaba Group Holding, the e-commerce giant, is set to raise $4.5 billion through a convertible-bond issue to fund share repurchases. This move follows a similar strategy employed by rival JD.com.
The company plans to issue convertible senior notes maturing in seven years with a coupon of 0.5%. The deal size could potentially reach $5.0 billion if the option to purchase additional notes is fully exercised.
The notes will be convertible into shares at an initial price of approximately $105.04 per American depositary share, representing a 30% premium over Thursday’s closing price. Alibaba intends to repurchase around 14.8 million ADS.
Fitch Ratings has assigned an A+ rating to the notes, anticipating Alibaba to continue its shareholder return policy over the next few years. The credit ratings company projects the company to spend between $11 billion to $13 billion on share buybacks in the upcoming fiscal years.
Alibaba’s shares in the U.S. closed 2.3% lower on Thursday, while its Hong Kong-listed shares were down by 0.3% during the midday session. This accelerated pace of buybacks comes amid heightened competition in the e-commerce sector and a slow economic recovery in China.
Despite facing challenges such as ongoing investments in user experience, user growth, and AI, Alibaba remains committed to enhancing its shareholder value through buybacks and other strategic initiatives.
