Alibaba announced an expansion of its stock buyback program at the beginning of this year, adding $25 billion in buybacks, one of the largest ever in China.
In a strategic step to strengthen its financial resources, Alibaba Group Holding announced its success in offering convertible bonds worth $4.5 billion, in one of the largest offerings of this kind in recent years.
The offering witnessed strong demand from global investors, with orders significantly exceeding the size of the offer. The company set the yield on the seven-year bond, due in 2031, at 0.5% with a conversion premium of 30%.
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This move comes at a time when Alibaba needs capital to strengthen its core businesses in e-commerce and cloud computing, which have been negatively affected by the regulatory campaign launched by the Chinese authorities on the technology sector.
The company indicated that part of the proceeds from the offering will be directed to repurchasing 14.8 million American certificates of deposit, in addition to financing future repurchases.
In a letter to shareholders, Alibaba Chairman Joe Tsai and CEO Eddie Wu confirmed that the company seeks to achieve a balance between providing liquidity and investing in existing and new businesses, including the field of artificial intelligence. They added that the company is working to reduce prices in cloud computing and artificial intelligence services, while increasing investments in this promising field.
Alibaba’s offering of convertible bonds comes during a period of increasing activity in this type of issuance, as the value of global deals exceeded $10 billion this May.
