Chinese e-commerce giant Alibaba launched a share issuance worth 8.74 billion euros to finance the development of artificial intelligence (AI).
In two announcements sent over the weekend to the Hong Kong Stock Exchange, where it is listed, the group revealed that it will offer 710 million new shares for sale at a unit price of 112.7 Hong Kong dollars (12.31 euros), representing a 9 percent discount compared to the average stock price over the previous five sessions.
Due to the discount, Alibaba’s shares in Hong Kong opened down 8.13 percent today, with losses deepening to 8.62 percent around 10:30 AM (3:30 AM in Lisbon), bringing the cumulative decline since the beginning of the year to 24.5 percent.
The transaction is expected to raise 80 billion Hong Kong dollars (8.74 billion euros), with the new shares representing 3.7 percent of the tech company’s total outstanding capital.
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“The issuance is conducted to expand the company’s global leadership in AI. Alibaba plans to use 100 percent of the raised funds to invest in its comprehensive AI capabilities, including the expansion and enhancement of AI infrastructure,” the company stated in its most recent release.
According to the Hong Kong newspaper South China Morning Post, several banks have already received expressions of strong interest from sovereign wealth funds and global institutional investors with long-term horizons.
Last week, the company disclosed its financial results for the first fiscal quarter, spanning April to June, which revealed a 76 percent drop in net profit, driven in part by heavy investment in infrastructure and AI development that led to a 75 percent increase in capital expenditures.
“We have positioned Alibaba in a more favorable stance to capitalize on the significant rise in demand for AI and AI computing capacity,” stated Chief Executive Officer Eddie Wu at the time.
