Alibaba Scraps Cainiao’s IPO, Announcing It Will Own The Entire Company

(CTN News) – On Tuesday, Alibaba announced it was scrapping its planned IPO for its smart logistics unit Cainiao, adding to recent troubles for the former Chinese tech darling.

Alibaba has postponed its planned IPO, which would have brought an injection of cash and a key exit deal to the company, as a result of deteriorating market conditions in China.

The investment community has soured on China of late because of a number of issues, including softer consumption and a housing and debt crisis.

Alibaba announced Tuesday that it would withdraw its IPO and listing application for Cainiao, and would also acquire all remaining shares in the company.

As of approximately 6:50 a.m. Eastern Time (ET), American depositary receipts were virtually unchanged in premarket trading in the United States.

As of the present, Alibaba owns a 64% stake in Cainiao.

As part of its plans, it intends to invest up to $3.75 billion in order to acquire the remaining 36% of the company from minority investors and employees with vested equity.

Alibaba’s chairman, Joe Tsai, said in a statement that the company decided to withdraw its planned IPO of Cainiao and instead acquire the entire business, believing the moment is right to invest in logistics.

A valuation of $10.3 billion has been put on Cainiao as a result of the offer. With Cainiao, Alibaba provides warehousing and fulfillment services, last-mile deliveries and pick-ups, and reverse logistics services to customers of its e-commerce sites Taobao and Tmall.

In contrast to its U.S. and European counterparts, Hong Kong, where Alibaba and Chinese tech peers Tencent, Baidu and JD.com are listed, has not followed a similar upward trajectory.

Over the past 12 months, Hong Kong’s Hang Seng index has fallen by approximately 15%. Dow Jones Industrial Average and Euro Stoxx 600 indexes, on the other hand, have increased by 21% and 15%, respectively, over the same period.

The performance of tech stocks has been particularly poor in China. In the past year, Alibaba shares have declined nearly 18%. It is reported that Tencent, Baidu, and JD.com are down 20%, 30%, respectively. In each case, 32%.

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