On March 29th, the international credit rating agency Moody's issued a comment stating that Alibaba has withdrawn Cainiao's initial public offering application and plans to acquire the equity of a minority shareholder in Cainiao; Liquidity remains strong.
On March 26th, Alibaba Group Holdings Limited announced that its logistics subsidiary Cainiao Smart Logistics Network Limited had withdrawn its initial public offering and listing application on the Hong Kong Stock Exchange. Meanwhile, Alibaba has proposed to acquire all of Cainiao's issued shares held by a minority shareholder at a price of $0.62 per share, for a total consideration of up to $3.75 billion.
The above announcement has no immediate impact on Alibaba's credit quality and rating. Moody's expects the company's outstanding liquidity to meet its announced share acquisition offer of up to $3.75 billion. Withdrawing Cainiao's initial public offering application will not affect Alibaba's liquidity, as Moody's did not include any potential IPO funds in its forecast.
As of December 31, 2023, Alibaba held RMB 555 billion in cash and similar cash resources. If included in Moody's forecast of RMB 180 billion to RMB 190 billion in annual operating cash flow, it will be sufficient to pay off its disclosed RMB 26.4 billion in short-term debt, as well as a total consideration of up to USD 3.75 billion (approximately RMB 27 billion) for repurchasing minority shareholder shares in Cainiao, and to meet capital expenditures and investment needs.
From a strategic perspective, Cainiao is an important logistics infrastructure for Alibaba, with partners including Taobao, Tmall, and external customers. Therefore, Moody's believes that Alibaba's continued investment in Cainiao has a positive support effect on its core e-commerce business both domestically and internationally. This move is also in line with Alibaba's announced goal of revitalizing the growth of Taobao and Tmall businesses.
However, withdrawing Cainiao's initial public offering application means that Alibaba will need to bear the necessary investment for Cainiao's expansion plans both domestically and internationally. Especially in the face of fierce competition in its core e-commerce business and the overall logistics industry in China. Due to the company's efforts to improve efficiency and increase decision-making flexibility, Cainiao's profitability and cash flow have improved in 2023, offsetting the potential execution risks mentioned above. Alibaba's lower leverage ratio, stable cash flow, and large cash scale will also provide additional cushioning.