Shares of Alibaba (BABA) gained over 5% during the pre-market trading session today after the Chinese tech giant revealed its intent to pursue a dual primary listing in Hong Kong.
With the new listing under the Shenzhen-Hong Kong Stock Connect, Alibaba will gain incremental access to millions of domestic investors in mainland China and reduce its dependence on global investors.
Currently, BABA’s shares trade on both the U.S. and the Hong Kong stock exchanges. However, the listing on the Hang Seng Index is secondary and not primary.
Historically, companies with a secondary listing in Hong Kong have seen much less trading activity compared to the American Depositary Receipts (ADRs) listed in the U.S.
Upon completion of the primary listing process, which is expected before year-end 2022, BABA shares will have two primary listings, one on the New York Stock Exchange (NYSE) and the other on the Hong Kong Stock Exchange.
The news comes as long-term investors wait with bated breath for BABA’s first quarter results, scheduled for next week on August 4.
As regulators in the U.S. and China continue to fight over their years-long dispute over financial auditing compliance, many Chinese companies run the risk of delisting after the 2024 deadline.
Alibaba CEO, Daniel Zhang, stated, “We have received approval from the Board to apply to add Hong Kong as another primary listing venue, in the hopes of fostering a wider and more diversified investor base to share in Alibaba’s growth and future, especially from China and other markets in Asia.”
He further added, “Hong Kong and New York are both major global financial centers, with shared characteristics of openness and diversity. Hong Kong is also the launch pad for Alibaba’s globalization strategy, and we are fully confident in China’s economy and future.”
Wall Street’s Bullish Take on BABA
The Wall Street community is optimistic about the stock, with a Strong Buy consensus rating based on 21 Buys, one Hold and one Sell. The average BABA price target of $154.36 implies a 52.74% upside potential to current levels.
High Smart Score on BABA
What’s more, BABA stock has a Smart Score of 9 out of 10 on TipRanks’ smart score rating system, which indicates that the stock has strong potential to outperform market expectations.
BABA shares have lost half of their market capitalization over the past year due to various factors, including regulatory and macroeconomic hurdles. In fact, they are far, far away from their all-time highs of $300 price levels seen in October 2020.
Amid the growing rift between Chinese and US regulators, the move by BABA could open new doors for more than 200 Chinese companies that may possibly get delisted from the U.S. exchanges in the future.
The fresh infusion of capital from domestic investors could begin the much-awaited upward trajectory for the stock.