Alibaba to Raise $3.2 Billion via Convertible Bond for Cloud and Global Expansion

Alibaba announced Thursday it will raise $3.2 billion through the sale of a zero-coupon convertible bond, the largest such deal this year according to Dealogic, surpassing DoorDash’s $2.75 billion issue in May. The move underscores the Chinese tech giant’s push to scale its cloud computing and international e-commerce operations.

Use of Proceeds

• ~80% will go toward data center expansion, tech upgrades, and cloud service improvements.

• The remainder will be invested in boosting e-commerce efficiency and market presence.

Bond Terms

• Convertible into Alibaba’s U.S.-listed shares.

• Conversion premium: 27.5%–32.5% above U.S. stock price.

• Maturity date: September 15, 2032.

Market Reaction

• Hong Kong shares rose 2.3% to HK$146.1, reversing earlier losses and moving in line with the Hang Seng Index.

• U.S.-listed shares fell 2.2% on Wednesday.

• Year-to-date: Hong Kong stock up 71.6%, U.S. stock up 71.1%.

Cloud and AI Strategy

Alibaba is one of China’s largest AI investors, pledging 380 billion yuan ($53.4 billion) over three years. CEO Eddie Wu recently highlighted AI as central to cloud revenue growth, saying: “We are seeing an increasingly clear path for AI to drive Alibaba’s robust growth.”

The company has raised capital aggressively in recent years:

• $1.5 billion via exchangeable bond in July.

• $5 billion convertible bond in May 2023.

Broader Market Context

Convertible bonds are seeing strong momentum in Asia-Pacific. Issuance this year totals $27.8 billion, just shy of last year’s $28.7 billion, marking the strongest run in three years.

Alibaba’s fundraising aligns with a surge in Hong Kong’s equity capital markets, where investors favor convertible bonds for their equity upside potential alongside principal repayment guarantees if conversion is not exercised.