Alibaba's decision to push ahead with its Hong Kong stock market listing despite worsening unrest came as a surprise to some of the city's most seasoned investment bankers.
Just a few weeks ago a senior executive at a Hong Kong investment bank scoffed at the idea of the deal happening before the end of the year, given the dramatic scenes on the streets. "They want to see some of this craziness subside," the banker said of Alibaba, adding: "They don't really need the money."
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That same banker is now helping the Chinese ecommerce giant carry out the world's biggest equity raising this year, worth up to US$13.4 billion ($20.9). Before the offer was confirmed last week, a senior executive at another bank hinted he would be willing to place a large bet against it happening in 2019, citing its size and the tight timetable.
Alibaba's debut is moving ahead despite increasingly violent clashes between police and protesters in the Asian financial hub, which have prompted the company itself to tell Hong Kong employees they can work from home. Pricing is expected on Wednesday.
The deal's backers are hoping a speedy listing will minimise risks from the territory's most serious political crisis since Britain handed sovereignty to China 22 years ago.
Some observers question the timing, given gloomy market sentiment that caused the benchmark Hang Seng index to drop almost 5 per cent last week, the second worst performance in the world. But other veteran market-watchers argue that the weak backdrop may actually strengthen the case for the offering from Beijing's perspective.
"The political situation has clearly got worse and it's a big deal in weak market conditions," said Fraser Howie, an independent analyst.
"But it's in China's interest to maintain Hong Kong as a financial centre. If this goes through, China can say 'Hong Kong is still functioning, we haven't closed things down'."
Alibaba originally filed for a Hong Kong listing in June, hoping to raise up to US$20b, but the offering stalled amid the political turmoil. Months later the company revived the offering with a lower fundraising target and on Wednesday it kicked off a week-long roadshow, seeking to sell 500m shares to investors.
Jack Ma, the Alibaba founder who retired as executive chairman this year, has close ties to China's ruling Communist party. He has said on several occasions, including in an interview with the Financial Times, that he would happily hand over all of his businesses to the party if he were asked to do so.
In the run-up to the company's US$25b initial public offering in New York five years ago, Ma brought in investors including China's sovereign investment fund CIC International and Boyu Capital, a private equity fund co-founded by Jiang Zhicheng, grandson of former president Jiang Zemin.
The listing could be "intended as a 'political message' of support for Hong Kong as a financial centre in what are, after all, unprecedented times in the city," said Philippe Espinasse, a former head of Asian equity capital markets at Nomura.
Alibaba's listing will also be the first in Hong Kong to dispense with offering physical copies of its prospectus, piles of which are typically stacked up in banks and handed out to retail investors.
The company says the move is for environmental reasons, but speed is a factor too. Jason Elder, a partner at law firm Mayer Brown, said going paperless makes sense due to the "sheer logistical challenges of printing that many books and getting them delivered".
"The way retail and institutional bookbuilds have always been done exposes offerings to more market volatility and potentially damaging market events over a longer pricing window," Elder added. "Reducing that window should improve Hong Kong's standing because you're allowing a company to build a book and price more quickly."
Alibaba's existing listing in New York also helped expedite its Hong Kong fundraising.
"You can't overstate that point," said Stephen Peepels, head of law firm Hogan Lovells' US securities practice in Asia-Pacific. The Hong Kong stock exchange, he added, "wouldn't completely rubber stamp it", but it would not have as many questions as it would for a company making a first move on to the public market.
The Alibaba offering might also put the Hong Kong bourse back on track to retain its listings crown for another year. If bankers execute an option to sell an additional 15 per cent of shares to investors, the secondary listing could be enough to push Hong Kong's year-to-date total above the US$32.5b raised on New York's Nasdaq, according to Dealogic data.
The deal has already attracted orders that are a multiple of the number of shares on offer, according to a person familiar with the deal. Significant interest from Asian sovereign wealth funds and Chinese institutions suggests the images of violence and unrest have done little to dent investor demand.
"It's not as if you're going to have tear gas wafting through the listing ceremony," said Howie.
- Additional reporting by Ryan McMorrow.
Written by: Hudson Lockett, Daniel Shane and George Hammond
© Financial Times