Alibaba’s Hong Kong Share Offering Should Worry U.S. Markets

The company isn’t abandoning New York, but its plan to add a listing in Asia tells other Chinese companies they have an IPO option closer to home.

Illustration: George Wylesol for Bloomberg Businessweek
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Alibaba’s $25 billion debut on the New York Stock Exchange in 2014 was, at the time, the largest-ever initial public offering in the U.S. Now that the company is said to be planning to raise $20 billion from a secondary stock offering in Hong Kong, the operators of America’s top exchanges should be worried that business from China will start to dry up.

Alibaba Group Holding Ltd. isn’t deserting New York, which will remain its primary listing. But its plan to add one in Hong Kong signals to other Chinese companies that they have IPO options closer to home, people familiar with the matter have said. Businesses without a three-year track record of profitability are still prohibited from listing on Chinese exchanges. But a soon-to-be-launched market in Shanghai will allow money-losing tech plays to be listed, and in April 2018, Hong Kong changed its regulations to allow unprofitable tech companies to list in the city. It also scrapped a strict one-share-one-vote rule for tech stocks, leading to mega-IPOs by Chinese smartphone operator Xiaomi Corp., which raised $5.4 billion in July, and food-delivery giant Meituan Dianping, which raised $4.2 billion ahead of its debut in September. The issues helped propel Hong Kong to become the world’s top IPO venue last year.