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Two people familiar with the company's intentions say the funds could be deployed into artificial intelligence projects or for acquisitions in areas such as food delivery and travel. This could come in handy as Alibaba fights for leadership in those two areas in which Meituan so far holds a dominant market share. Last year, Alibaba bought out other shareholders in food delivery platform Ele.me.
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FULL ARTICLE
Why is Alibaba listing in Hong Kong if it doesn't need money?With Singles’ Day tally soaring past $30bn, company looks to tap Chinese retail investors
Does Alibaba Group Holding really need another $10 billion or so?
China's biggest e-commerce company is already Asia's most valuable listed company, with a market capitalization of $486 billion based on the price of its New York Stock Exchange-traded shares. As of Sept. 30, it had $33 billion in cash and equivalents on hand and only $21 billion in debt.
The company's online platforms had logged more than $30 billion in transactions during Monday's "Singles' Day" sales extravaganza by late afternoon though only a tiny portion of that will flow over to the company's top line as it mostly profits from charging vendors for advertising and other services.
Nonetheless, people familiar with its plans say Alibaba is moving forward this week with an application for a secondary market listing on the Hong Kong Stock Exchange. The company has kept silent in public about this, but reports have put the size of this offering at between $10 billion and $15 billion, with a listing committee hearing expected later this week.
That range would make Alibaba's stock sale the largest in Hong Kong this year and potentially the largest in the world, depending on the outcome of Saudi Aramco's initial public offering. Beer maker Budweiser Brewing Co. raised about $5 billion in Hong Kong in September in Asia's largest so far.
Rather than a pitch for money, analysts say Alibaba's prime motivation is to make its shares more accessible to Chinese investors, in line with a push by Beijing for Chinese companies to look more toward their home market.
A Hong Kong listing would also give Alibaba some insurance against the risk it could be delisted in New York. Officials in the Trump administration and members of Congress have been discussing proposals that could directly or indirectly force out Chinese companies. Recent movement toward a trade deal with Beijing seems to have reduced the chance of this proceeding in the short term.
"Alibaba's secondary listing is planned to channel money from Chinese investors who otherwise cannot invest in U.S.-listed stocks," said Vicky Wu, an analyst in Hong Kong with brokerage firm ICBC International.
The country's capital controls make it difficult for Chinese investors without money already offshore to buy U.S. stocks. But with a listing in Hong Kong, Chinese investors would expect to be able to buy Alibaba shares through the "Stock Connect" channels that link the Hong Kong exchange with counterparts in Shanghai and Shenzhen.
The Stock Connect program initially excluded Hong Kong-listed companies which have some shares with extra voting rights, but the Chinese authorities relaxed this bar last month, allowing domestic investors to access the stocks of internet services company Meituan Dianping and phone maker Xiaomi.
The Hong Kong exchange itself earlier barred companies with such dual class shares from listing, but eased up after losing the fight for Alibaba's primary listing in 2014.
While Shanghai has been pursuing various reforms in hopes of enticing offshore listed technology companies list with it, a person familiar with Alibaba's plans say the company worried a dual listing between Shanghai and New York would be overly complicated by China's capital controls.
Some observers added that the Hong Kong listing could pressure the shares of rivals Tencent Holdings and Meituan as investors rebalance their portfolios of Chinese internet stocks to shift cash into Alibaba.
Under new rules for secondary listings introduced earlier this year, Alibaba's Hong Kong listing prospectus has so far been kept confidential so it has not had to disclose its planned use of the sales proceeds.
Two people familiar with the company's intentions say the funds could be deployed into artificial intelligence projects or for acquisitions in areas such as food delivery and travel. This could come in handy as Alibaba fights for leadership in those two areas in which Meituan so far holds a dominant market share. Last year, Alibaba bought out other shareholders in food delivery platform Ele.me.
Credit Suisse and CICC are leading the share sale with Citigroup and JPMorgan also taking roles and more banks expected to be involved.
The offering had been sidetracked in recent months with some observers saying Beijing did not want Alibaba to proceed to avoid the appearance of awarding Hong Kong with a prestigious new listing amid constant anti-government demonstrations that have raged for 23 weeks.
On Monday, the Hong Kong bourse had shed 2% by midday after at least one and possibly two protesters were shot and injured by police during demonstrations.
Ahead of Singles' Day, China's anti-monopoly watchdog has also been warning Alibaba, which has a 60% market share of Chinese e-commerce, against pressuring companies into exclusive arrangements for online sales.
A $45,000 Loan for a $27,000 Ride: More Borrowers Are Going Underwater on Car Loans
As cars become more expensive, buyers are getting hampered by burdensome loans
John Schricker took out a loan to buy a car in 2017. Then he took out another. And then another.
In two years, the 40-year-old electrician signed up for four auto loans, each time trading in the previous car and rolling the unpaid balance into the next loan. He recently bought a $27,000 Jeep Cherokee with a $45,000 loan from Ally Financial Inc. ALLY -0.75%
Consumers, salespeople and lenders are treating cars a lot like houses during the last financial crisis: by piling on debt to such a degree that it often exceeds the car’s value. This phenomenon—referred to as negative equity, or being underwater—can leave car owners trapped.
Some 33% of people who traded in cars to buy new ones in the first nine months of 2019 had negative equity, compared with 28% five years ago and 19% a decade ago, according to car-shopping site Edmunds. Those borrowers owed about $5,000 on average after they traded in their cars, before taking on new loans. Five years ago the average was about $4,000.
Rising car prices have exacerbated an affordability gap that is increasingly getting filled with auto debt. Easy lending standards are perpetuating the cycle, with lenders routinely making car loans with low or no down payments that can last seven years or longer.
Borrowers are responsible for paying their remaining debt even after they get rid of the vehicle tied to it. When subsequently buying another car, they can roll this old debt into a new loan. The lender that originates the new loan typically pays off the old lender, and the consumer then owes the balance from both cars to the new lender. The transactions are often encouraged by dealerships, which now make more money on arranging financing than on selling cars.
Consumer lawyers say borrowers are typically trading in their vehicles because they have to—often because their needs change, or because the vehicles have problems.
“These aren’t Rolls-Royces,” said David Goldsmith, a lawyer who defends consumers in auto cases. “They’re Ford Escapes.”
Mr. Schricker would like to get a new car because the Jeep Cherokee started having mechanical problems this year. He recently discovered the vehicle was in an accident before he bought it, a fact he said the dealership didn’t disclose. The dealership, Rotolo Motors, didn’t return requests for comment.
Mr. Schricker hired a lawyer, who is trying to resolve the issue with the dealership. He estimates that even if he sold the vehicle, he would still owe Ally up to $18,000. Ally said it couldn’t comment.
Mr. Schricker, who lives in Bethel Park, Pa., said he didn’t intend to cycle through so many vehicles. He replaced one because it had 100,000 miles and another when he went through a divorce, and he changed cars again when his family was expanding.
Borrowers with negative equity at the time of purchase tend to get longer loan terms, higher interest rates and higher monthly payments, according to Edmunds. The higher rates and longer repayment periods mean a smaller share of their monthly payments goes toward paying down principal in the first few years of the loan. The result for some consumers is a cycle in which each new trade-in leaves them deeper underwater.
Underwater car loans are more prevalent among subprime borrowers, according to ratings firms. That is in part because consumers with lower credit scores often don’t have the means to pay off the remaining balance on one car loan before buying their next vehicle.
If borrowers default, lenders generally repossess the cars and try to resell them, then apply that money to the unpaid balance. Often, though, that isn’t enough to cover the borrower’s unpaid balance.
Yolanda Finley of Pomona, Calif., bought a used 2011 Chevy Traverse with a loan of $25,585 from Santander Consumer USA Holdings Inc. SC 0.08% in 2014. The loan included a nearly $2,200 balance she owed on her Dodge Durango after she traded it in.
The Chevy broke down in 2017 shortly after Ms. Finley took it for an oil change and she couldn’t afford the repairs. She says that Valvoline installed a faulty oil filter and she is suing the company. Valvoline said it was aware of her allegations and had no comment.
Ms. Finley, a 38-year-old legal-support assistant, stopped making payments. Santander repossessed the Chevy in 2017 and resold it for $2,400. The lender soon after informed her that she still owed around $27,000, which she hasn’t paid. Santander said it couldn’t comment on a specific customer’s experience.
Ms. Finley currently drives a GMC Yukon with more than 188,000 miles. She bought it from a family friend for $3,500 out of pocket.
She would like to buy another car, but the only loans she has been offered have high interest rates she can’t afford. Her credit reports state she defaulted on her car loan.
Most auto loans are originated at dealerships, which assign loans to a variety of lenders, including banks, credit unions and the finance arms of car manufacturers.
Lenders are typically willing to make the underwater loans, though they often charge high interest rates. Many of the loans are bundled into bonds and snapped up by Wall Street investors.
The added debt can make it difficult for borrowers to stay current. Some 5.2% of outstanding securitized subprime auto-loan balances were at least 60 days past due on a rolling 12-month average during the period ending in June, up from 4.8% the year before and 4.9% two years before, according to Fitch Ratings.
Nicole-Malia Tennent and Shyanne Fernandez, both in their early 20s, wanted to trade in the car they shared for something less expensive last year. The friends, who live in Hawaii, ended up splurging on a new vehicle and moving the unpaid loan balance of $12,500 from an older GMC into a new loan for a 2018 GMC Sierra truck.
The rollover debt helped drive up the new loan balance to more than $66,000. The friends now split the payment of more than $900 a month, which they owe to Pearl Hawaii Federal Credit Union for 84 months. Their old loan was about $500 a month.
Pearl Hawaii said in a statement that the dealership and the borrower worked out the sale agreement. The dealer, Cutter Buick GMC, declined to comment.
The friends have had to cut back elsewhere to pay for the truck.
>>> Up
* Acerinox Raised to Neutral at BofAML; PT 10.20 euros (+)
* Aston Martin Raised to Buy at HSBC; PT 550 pence
* Duerr Raised to Outperform at MainFirst; PT 40 euros
* ElringKlinger Raised to Hold at Bankhaus Lampe; PT 8 euros
* Enagas raised to Hold from Sell, price target: €22.50 at Societe Generale
* HeidelbergCement raised to Hold from Sell , Price Target €68 at Societe Generale
* MIPS AB Raised to Buy at ABG; PT 190 kronor
* Telefonica Raised to Outperform at Credit Suisse; PT 8.50 euros
* Worldline Raised to Hold at HSBC; PT 55 euros
>>> Down
* Accor Cut to Neutral at Citi; PT 43 euros (+)
* ArcelorMittal Cut to Hold at Commerzbank; PT 15.50 euros
* Banca Farmafactoring Cut to Neutral at Banca Akros (ESN) (+)
* Bpost Cut to Neutral at MainFirst; PT 11.60 euros
* Freenet Cut to Hold at M.M. Warburg (+)
* Jungheinrich Cut to Reduce at Commerzbank; PT 22 euros
* Rheinmetall Cut to Hold at Berenberg; PT 110 euros
* Rolls-Royce Cut to Hold at SocGen; PT 825 pence
* Siemens Cut to Hold at Nord/LB; PT 114 euros
* Virgin Money UK Cut to Hold at Investec; PT 155 pence (+)
>>> Initiation
* Addiko Rated New Neutral at Citi; PT 16.15 euros
* Schneider Resumed Neutral at Citi; PT 90 euros
>>> Call
* Rheinmetall Downgraded at Berenberg With Slower Growth Ahead
* Schneider Rating Resumed as Neutral at Citi, ABB Remains Buy
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