Alibaba shares plunged as much as 11% on Monday, 24 August, after the Chinese technology major announced an HK$80 billion ($10.2 billion) share placement to raise funds for its artificial intelligence expansion. The company plans to issue 710 million new shares at HK$112.70 each, below Friday’s closing price of HK$123. The stock fell as much as 10% to HK$110.10 during early trading.
Alibaba said the entire net proceeds from the placement will be directed towards strengthening its full-stack AI capabilities, including expanding and upgrading its AI infrastructure. The deal is expected to close on 26 August, with the newly issued shares subject to a 90-day lock-up period.
The fundraising follows a sharp decline in Alibaba’s profitability. The company reported a 75% year-on-year fall in June-quarter net profit, as rising spending on AI and computing infrastructure weighed on earnings. Its capital expenditure also increased significantly during the quarter.
The latest share sale highlights Alibaba’s aggressive investment strategy as it seeks to strengthen its position in the increasingly competitive AI race, while investors remain concerned about share dilution, elevated capital expenditure and the longer timeline for AI investments to generate returns.
