Chinese e-commerce giant Alibaba Group Holdings (HK:9988) (NYSE:BABA) is cutting its stake in Chinese electric vehicle (EV) maker XPeng (HK:9868) (NYSE:XPEV), as per a U.S. regulatory filing from December 15. Alibaba’s subsidiary Taobao China, which holds the shares, is selling them simply to monetize its 2019 investment. The company clarified that the stake sale does not reflect Alibaba’s view change in XPeng’s long-term performance prospects.
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The stake sale will free up some capital for Alibaba, in line with its capital management goals. XPeng shares are down 4.7% in Hong Kong trade as of writing, while Alibaba’s shares rose over 2% in early trade this morning.
Alibaba Trims Stake in XPeng
Taobao, Alibaba’s online shopping platform, intends to sell 25 million ADRs (American Depositary Receipts) of XPeng, valued at US$391 million as per XPeng’s closing price on Friday. Following the share sale, Alibaba will have a 7.5% stake in XPeng, down from the current 10.2%.
Even so, Alibaba will remain the second-largest shareholder in the EV maker after founder He Xiaopeng. Meanwhile, the third largest shareholder is German carmaker Volkswagen (DE:VOW), which recently acquired a 4.99% stake in XPeng.
Taobao acquired shares in XPeng during a pre-initial public offering (IPO) round in September 2019. Both companies also have other strategic arrangements, including Alibaba Cloud, which supports XPeng’s autonomous driving capabilities. Plus, Alipay is setting up an in-car payment infrastructure for XPeng.
What is the Future Price of Alibaba?
On TipRanks, the Alibaba Group Holdings share price target of HK$124.34 implies 73.5% upside potential from current levels. Also, with six Buys versus one Hold rating, 9988 stock commands a Strong Buy consensus rating. Meanwhile, year-to-date, Alibaba shares have lost 19.2%.
