Alibaba Stocks (BABA) gained more than 5% during today’s pre-market session after the Chinese tech giant revealed plans to pursue a dual primary listing in Hong Kong.
With the new listing under the Shenzhen-Hong Kong Stock Connect, Alibaba will gain gradual access to millions of domestic investors in mainland China and reduce its reliance on global investors.
Currently, shares of BABA are traded on both the United States and Hong Kong stock exchanges. However, listing on the Hang Seng Index is secondary, not primary.
Historically, companies with a secondary listing in Hong Kong have seen much less trading activity than US-listed American Depositary Receipts (ADRs).
Following the primary listing process, which is expected before the end of 2022, BABA shares will have two main listings, one on the New York Stock Exchange (NYSE) and the other on the Hong Kong.
The news comes as long-term investors eagerly await BABA’s first quarter results, due next week on August 4.
As regulators in the United States and China continue to tussle over their years-long dispute over financial audit compliance, many Chinese companies are at risk of being delisted after the 2024 deadline.
Alibaba CEO Daniel Zhang said: “We have received board approval to request the addition of Hong Kong as an alternate primary listing location, hoping to foster an investor base. broader and more diverse to share in Alibaba’s growth and future, especially China and other markets in Asia.
He added, “Hong Kong and New York are two major global financial centers, with common characteristics of openness and diversity. Hong Kong is also the launching pad for Alibaba’s globalization strategy, and we have full confidence in China’s economy and future. »
Wall Street’s bullish view of BABA
The Wall Street community is bullish on 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 potential upside of 52.74% from current levels.
High smart score on BABA
Additionally, BABA stock has a smart score of 9 out of 10 on the TipRanks smart rating system, indicating 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 a variety of factors, including regulatory and macroeconomic hurdles. In fact, they are far, far away from their all-time high price level of $300 seen in October 2020.
Amid the growing rift between Chinese and US regulators, BABA’s decision could open new doors for more than 200 Chinese companies that could be delisted from US stock exchanges in the future.
The new injection of capital from domestic investors could begin the stock’s long-awaited upward trajectory.