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Cainiao failed to sound the gong of the Hong Kong Stock Exchange as expected.
On the evening of March 26th, Alibaba Group announced that its logistics subsidiary Cainiao Intelligent Logistics Network Co., Ltd. had withdrawn its initial public offering and listing application on the Hong Kong Stock Exchange.
At the same time, Alibaba plans to offer a tender offer of $0.62 per share to acquire all the equity of Cainiao's minority shareholders and the equity already owned by employees, for a total consideration of $3.75 billion, equivalent to approximately RMB 27 billion.
The repurchase efforts of billions demonstrate Alibaba's determination to continue investing in this logistics platform. Alibaba Group Chairman Cai Chongxin also stated, "Considering the strategic importance of Cainiao to Alibaba and the significant long-term opportunities we see in building a global logistics network, we believe that now is the appropriate time for Alibaba to increase investment in Cainiao."
Against the backdrop of Alibaba's strategic adjustment, what new directions will rookies take?
Shocking listing for 180 days, not waiting for a better time
In March last year, Alibaba launched an organizational transformation, and the Alibaba economy will be split into 6+N business groups, involving multiple business sectors such as cloud intelligence, Cainiao, Hema, and Alibaba International Digital Commerce. It also proposed to independently go public when the listing conditions are ripe.
According to Alibaba's plan at the time, Cainiao planned to complete its IPO within 12 to 18 months.
Half a year later, Cainiao submitted a listing application to the Hong Kong Stock Exchange, becoming the first business group to officially enter the IPO process after Alibaba's organizational split. According to the prospectus at that time, Cainiao's revenue for fiscal years 2021 to 2023 was 52.7 billion yuan, 66.9 billion yuan, and 77.8 billion yuan, respectively, making it one of the top growing subsidiaries of Alibaba Group in multiple quarters.
At one point, the outside world also had high expectations for Cainiao's IPO.
The Global Unicorn List released by Hurun Research Institute in May 2023 shows that Cainiao's valuation is 185 billion yuan. In January of this year, Bloomberg reported that "Cainiao IPO will be one of the hottest IPO plans in Asia in 2024. After going through a difficult year of 2023, Asian IPOs may be boosted as Hong Kong expects large-scale Chinese transactions to gradually return this year."
But within a month, the wind direction began to change. On February 7th, after Alibaba released its third quarter financial report for the 2024 fiscal year, Cai Chongxin stated in a earnings conference call that he is not in a hurry to have Cainiao and Hema go public.
Afterwards, Cai Chongxin also stated in an interview with CNBC that since the announcement of the restructuring in March last year, market sentiment has been sluggish, and conducting capital market transactions has actually failed to bring transparency to the potential value of the business. In the current market environment, for rookies, he hopes to wait for a better opportunity to go on the market.
Now, the boots are landing.
According to Time Finance, during a conference call on the evening of March 26th, Cai Chongxin also frankly stated that considering the current challenging IPO environment cannot reflect the true valuation of Cainiao and cannot achieve good value returns for shareholders, continuing the IPO is not in line with the group's development strategy, and therefore withdrew the application.
Another person familiar with the Hong Kong IPO market also pointed out to Time Finance that the performance of the Hong Kong stock market in 2023 was relatively sluggish, with both fundraising amounts and quantities reaching new lows in recent years, especially the lack of large-scale IPO projects. Therefore, it is not ruled out that Cainiao may slow down its listing process due to lower pricing and capital performance than expected.
In addition, the China Securities Regulatory Commission disclosed on March 21 the "Registration Form for Overseas Issuance and Listing of Securities by Domestic Enterprises (Initial Public Offering and Full Circulation)", and the registration status for Cainiao's listing is still in "Supplementary Materials" and has not yet received approval for issuance.
However, Cai Chongxin stated that the regulatory authorities did not have any impact on withdrawing the IPO, and the decision was mainly based on internal decisions.
Alibaba turns to focus, rookies need to fight a cooperative battle
At this time, Alibaba is just one year away from launching the "1+6+N" organizational transformation.
Over the course of a year, the rudder of this vast commercial empire changed several times. Since the management handover of Alibaba Group in September last year and the new management taking office, its strategy has also been adjusted, and it has reorganized and focused on the two core businesses of e-commerce and cloud computing, "investing more resolutely and making more decisive choices."
At the beginning of 2024, rumors of Alibaba's intention to sell Intime Department Store, Hema, Ele.me, and other products were frequently reported. In addition, the February financial report disclosed that Alibaba has reasonably and orderly exited some non core assets, completing a total of $1.7 billion in non core asset exits in the first nine months of the 2024 fiscal year.
In the beginning of 2024, Alibaba reduced its holdings in Kuai Gou Taxi four times within a month, and its shareholding ratio decreased to 4.88%. In the past two days, Alibaba has successively reduced its holdings in stocks of Bilibili and Xiaopeng Motors. At the same day's conference call, Alibaba's management stated that holding shares in several courier companies is a strategic investment and there are currently no plans to exit.
On the other hand, Alibaba has focused more energy and financial resources on investing in its core business. On March 14th, Yonhap News Agency reported that Alibaba will invest $1.1 billion in South Korea over the next three years to build a comprehensive logistics center, which is one of the important markets for Alibaba's overseas e-commerce business.
At a conference call on March 26th, Alibaba's management also mentioned that in addition to the capital market environment, another important reason for withdrawing its IPO application is based on strategic coordination considerations.
Cai Chongxin stated that Alibaba's primary goal at present is very clear, which is to win in the e-commerce field. To achieve this, it is necessary to restore market share and drive business growth. The rookie, who provides unique and valuable logistics services for Alibaba's domestic and international e-commerce business, is a key link.
In the past few months, Alibaba has evaluated its domestic and international e-commerce business and concluded that in order to provide the most competitive consumer experience, it is necessary to achieve deep integration between Cainiao and the group's e-commerce business.
Especially in the rapidly growing international business, "we hope that Cainiao can accelerate its integration into cross-border e-commerce business and further align with these businesses for development." Therefore, Cai Chongxin expressed his hope that Cainiao's management can focus on executing global expansion plans and synergies with e-commerce business, without being distracted by the listing process.
Wan Lin proposes a second entrepreneurship and rewards employees with incentive rewards
Alibaba has also expressed its determination to invest in Cainiao.
At the conference call, Cai Chongxin stated that Alibaba will fully support the investment and development of Cainiao's global logistics network with the strong cash flow capability of the group.
However, Cai Chongxin also mentioned that we need to take a long-term perspective on the prospects of cross-border e-commerce. To achieve the goal of delivering packages between any two locations within 72 hours, it is necessary to invest and develop in different countries, regions, and links. Therefore, investing in Cainiao requires patience and a longer period of time to generate returns.
After withdrawing its IPO application, Alibaba's first investment in Cainiao was a buyback of $3.75 billion.
According to the previous prospectus disclosure, in addition to the major shareholder Alibaba, as of the final issuance date, the shareholder list also includes the original investors Intime Group, Fosun Group, Fuchun Group, and Three Links and One Da, as well as investors such as GIC and Temasek introduced in subsequent financing. From March 11, 2016 to July 3, 2020, Cainiao conducted three rounds of financing, raising a total of 31 billion yuan.
At present, Alibaba Group owns approximately 63.7% of Cainiao's fully diluted equity (including vested equity under Cainiao's employee stock ownership plan), and will provide up to $3.75 billion in cash for the tender offer to acquire all equity of Cainiao's minority shareholders and employee vested equity. Minority shareholders and employees of Cainiao can choose to sell or continue to hold Cainiao's equity.
The management of Alibaba stated that the repurchase plan will be completed in June and July of this year and will not have any significant impact on the group's finances. This move is also aimed at reducing the uncertainty that minority shareholders need to face and providing liquidity opportunities for a few investors with investment years of around 8-10 years.
In addition, Alibaba stated that it is necessary to stabilize the morale of Cainiao employees and ensure operational security. According to information provided by Cainiao, the employee equity acquisition plan for Cainiao will be implemented in August 2024, and employees can voluntarily sell all Cainiao shares that have already been owned on or before August 1, 2024.
From the first impact on independent listing to now withdrawing its IPO application, Cainiao has witnessed Alibaba's strategic changes and adjustments, and its own development has also added a touch of uncertainty.
"This year is a crucial year for Cainiao's second entrepreneurship journey, and all employees need to continue to work together." On the evening of March 26th, Cainiao Group CEO Wan Lin sent an email to all employees, announcing the launch of a second entrepreneurship bonus incentive plan for Cainiao employees. According to the above plan, in addition to receiving the normal year-end bonus in April 2025, regular employees of Cainiao will also receive an additional bonus of the same amount in August 2025.
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