On March 26th, Alibaba Group announced that its logistics subsidiary Cainiao Network Technology Co., Ltd. has withdrawn its initial public offering and listing application on the Hong Kong Stock Exchange.

At the same time, Alibaba plans to make an offer to minority shareholders (including employees) of Cainiao to repurchase all issued shares of Cainiao at a price of $0.62 per share, for a total consideration of up to $3.75 billion. Cainiao shareholders can choose to accept the offer and sell their shares to Alibaba in exchange for cash consideration or continue to hold Cainiao shares.

Currently, Alibaba owns approximately 63.7% of Cainiao's fully diluted equity (including the attributable equity under Cainiao's employee stock ownership plan).

Perhaps aware of many doubts from the outside world, Alibaba held a temporary conference call at 9:30 pm on the day of the announcement to discuss the latest developments in the aforementioned matter.

Considerations for withdrawing the rookie IPO

During the conference call, Alibaba's Chairman of the Board, Cai Chongxin, stated that the withdrawal of Cainiao's IPO was mainly due to two considerations: first, it was related to the group's strategy, and second, it was related to the stage of Cainiao's IPO process.

From the perspective of group strategy, Alibaba's primary goal is very clear, which is to win in the e-commerce field. To achieve this, Alibaba needs to restore market share and drive business growth. Cai Chongxin stated that Cainiao provides unique and valuable logistics services for Alibaba's domestic and international e-commerce business. In the past few months, Cainiao has evaluated its e-commerce business in China and internationally, and concluded that in order to provide the most competitive consumer experience, it is necessary to achieve deep integration between Cainiao's operations and the group's e-commerce business.

He said, "Considering the strategic importance of Cainiao to Alibaba and the significant long-term opportunity of building a global logistics network, we believe that now is the appropriate time for Alibaba to increase its investment in Cainiao. For Cainiao, there will be opportunities in the future to expand the global logistics network and become a leading network serving global customers through more sustained infrastructure investment."

From the stage of IPO, Cai Chongxin believes that there is currently no market environment for releasing value to shareholders through capital market trading actions (at least in the Asian market). "At present, the market is sluggish and lacks liquidity, so it is meaningless to force (Cainiao listing)."

Cai Chongxin also stated that the acquisition offer price reflects Cainiao's valuation of 10.3 billion US dollars, and the Alibaba board of directors approved the offer after confirming that the price can reflect fair value.

For shareholders who hold a minority stake in Cainiao, they have the right to choose whether to continue holding shares. Cai Chongxin stated that this move is to further release liquidity value to long-term shareholders who have accompanied Cainiao's growth for 8 to 10 years.

During the Q&A session of the conference call, when discussing Cainiao's long-term plan, Cai Chongxin stated that Cainiao plans to double its global logistics network coverage to achieve the goal of "delivering packages between any two locations within 72 hours.".

Several investment banks: no surprise to rookie's withdrawal of IPO

In its third-quarter results disclosed in November last year, Ali said it had decided not to move forward with a full spin-off of its Cloud Intelligence Group, and that its plans for the IPO of Box Ma had been put on hold.

At the time, the company said it was holding off on the IPO because it was internally evaluating market conditions and other factors necessary to ensure the successful implementation of the project and enhance shareholder value. Ali also said that Cainiao had applied for an IPO in Hong Kong and had filed an A1 with the Hong Kong Stock Exchange. After only four months, Ali announced that the rookie IPO plan was declared completely shelved.

However, for Ali's move, a number of investment banks believe that within the expected.

Lyon in a new research report pointed out that Ali based on strategic considerations and capital market conditions and withdrew the IPO application of the bird, this move is not entirely surprising.

Fury also released a research report that in the current market conditions, Ali withdrew its subsidiary Cainiao's Hong Kong IPO application, the market is not entirely surprising. Fury still maintains a "buy" rating on Ali, with a target price of HK$114.

HSBC Global issued a research report that shares reacted calmly to Ali's announcement, arguing that the market had already expected Cainiao to withdraw its IPO, as management had previously indicated in its Q4 2023 results meeting that the company was not in a hurry to move forward with Cainiao's IPO.The bank believes that unfavorable market conditions and sentiment are the main reasons why Ali did not follow through with its IPO plan, but this does not change the role of Cainiao as a key business that supports Taobao, Tmall and Alibaba's international e-commerce.

The bank believes that unfavorable market conditions and sentiment are the main reasons for Ali's decision not to pursue an IPO, but this does not change the fact that Caijiao is a key business supporting Taobao Tmall and Alibaba's international e-commerce. HSBC Global also believes that the valuation of the buyback offer to Cainiao employees is reasonable and will help boost morale.

Today (March 27), Alibaba-SW shares fell 2.13% to close at HK$68.8.

Cai Chongxin: No plan to reduce the shares of express delivery companies for the time being

Recently, Ali first sold 838,400 shares of Gogox at an average price of HK$0.5045 per share, with a transaction value of about HK$423,000 per share.

Then Ali's subsidiary Taobao China sold 33 million shares of XPeng Auto ADSs (American Depositary Receipts), with a total value of more than $300 million. At this point, Taobao China's stake in XPeng Automobile will be below 5%.

Then, Ali sold 30.85 million BiliBili ADSs, cashing out $357.8 million.

Ali's selling off its holdings in other companies so frequently in a short period of time has sparked intense curiosity. In this temporary conference call, Cai Chongxin did not respond positively to the reasons for the above reduction, but only said that the above reduction behavior "at present, everything is going well".

When asked whether he would consider reducing his stake in the express company after the shelving of the listing of the bird, Cai Chongxin said: "The shareholding in the express company is of great strategic importance to us. Therefore, at present we have no plans to change this part of the shareholding. The group has many other non-core investments, but investments related to express companies are by no means one of them."