Alibaba Group (NYSE:BABA) could be considering a $5 billion convertible bond sale following JD.com’s (NASDAQ:JD) recent $1.75 billion offering, according to a Bloomberg exclusive report. The report stated that the Chinese tech giant has already discussed with investment banks about the sale of bonds convertible into US-listed stock.
Why Is Alibaba Raising Capital?
The purpose of this bond sale is to finance share buybacks and support growth. According to the report, the offering could take place this week, although a final decision has not yet been reached.
Alibaba requires capital to invest in its core businesses, particularly in commerce and cloud services, which have experienced declines in market share due to regulatory crackdowns and internal challenges. The company is cutting prices on its cloud and AI services and is also ramping up investments in AI technology. Earlier this year, Alibaba expanded its share buyback program by $25 billion, marking one of the largest buyback programs in China’s history.
Furthermore, the company’s Fiscal Q4 net income plummeted by 86% year-over-year to RMB3.3 billion, primarily attributed to an unexplained writedown for losses on its public holdings, including AI company SenseTime, as well as increased spending to combat its competitors.
Is BABA a Buy or Hold?
Analysts remain bullish about BABA stock, with a Strong Buy consensus rating based on 14 Buys and three Holds. Year-to-date, BABA has increased by more than 6%, and the average BABA price target of $103.46 implies an upside potential of 25.1% from current levels.
