Alibaba announced a $10.2 billion share offering to fund investment in artificial intelligence, a move that could strengthen its position in the sector but reignited fears of dilution and sent its stock tumbling.
The Chinese e-commerce giant said on Sunday that it had agreed to place 710 million new shares with investors outside the United States at HK$112.70 each.
The price represents a steep discount to Friday's closing price of HK$123.00.
If the full offering is completed, gross proceeds will total HK$80.0 billion, equivalent to $10.2 billion, which Alibaba said will go exclusively toward strengthening its AI capabilities.
Bookbuilding closed within a few hours, with total demand reaching $28 billion, including nearly $6 billion from sovereign wealth funds and long-only investors, according to a source with knowledge of the matter. The source said the offer was oversubscribed nearly three times over, with those investors receiving more than 40% of the allocation.
Alibaba shares fell as much as 10% at the open of Hong Kong trading and closed Monday down 8.5%. In pre-market trading in New York, Alibaba's American depositary receipts were down 2.1% at 8:25am Brasília time.
Heavy AI Spending Hits Profit
Alibaba, headquartered in Hangzhou, has been raising its technology spending to compete with rivals in the fast-growing AI sector.
The cost of that strategy showed up in earnings released last week, when net profit fell 76% in the fiscal first quarter as investment in AI infrastructure sharply boosted capital expenditure.
Analysts Weigh Dilution Against Growth
BofA Securities said in a note that the placement could initially weigh on sentiment because of the immediate dilution.
Still, the bank kept an optimistic view, citing a strong outlook for Alibaba's cloud business, improving cost-effectiveness of its AI investments, and a sequential recovery in free cash flow. BofA described the transaction as a combination of growth financing, funding diversification and preventive strengthening of the balance sheet.
Deal Details and Timeline
The placement represents about 3.70% of Alibaba's total shares outstanding at the time the deal was struck. The operation is expected to be completed on Wednesday, with CICC, HSBC, Morgan Stanley and UBS among the coordinating banks.
Competing in China's AI Race
Alibaba is competing in a market where Chinese companies are rolling out increasingly sophisticated AI models at an accelerating pace.
The company has been updating its main model family, the Qwen series, and integrating it into its ecosystem. It recently launched Qwen3.8-Max, described as one of the largest open-source AI models in the world.
