Alibaba Group Holding Ltd BABA has decided to put the initial public offerings (IPOs) of its logistics arm Cainiao Smart Logistics and brick-and-mortar chain Freshippo on hold due to challenging market conditions.
What Happened: Alibaba’s Chairman Joe Tsai announced the decision during an earnings call on Wednesday, citing unfavorable market conditions as the primary reason for the delay.
“Market conditions currently are just not in a state where we believe we can really truly reflect value, the intrinsic value of these businesses,” Tsai said.
“Having said that, we continue to explore value creation through separate financings of large business units,” Tsai said.
“But given the challenging market conditions, as I said, we’re not in a hurry on the timing of these transactions.”
Alibaba’s Cainiao Smart Logistics Network Ltd. had previously filed for its Hong Kong IPO in September, with the first-time share sale expected to raise a minimum of $1 billion. However, the Chinese securities regulator requested additional financial and asset information in November.
Freshippo, on the other hand, began preparing for a public offering in April last year. The group’s CFO, Toby Xu, confirmed that Alibaba has a “strong” balance sheet with a “certain portion” of offshore cash, along with other options such as leveraging for the share buybacks.
Why It Matters: The decision to delay the IPOs of Cainiao and Freshippo comes after Alibaba reported a 5% year-on-year revenue growth for the third quarter of its fiscal year 2023, slightly missing analyst forecasts. The company’s new share buyback plan, aimed at boosting investor confidence, brings its total repurchase program to $35.3 billion over the next three fiscal years.
Despite the challenging market conditions, Alibaba’s other major business units, including the Local Services Group, Cloud Intelligence Group, and Digital Media and Entertainment Group, all reported growth. The company’s International Digital Commerce Group reported a 44% year-on-year revenue increase, surpassing Refinitiv analysts’ estimates for 37.9% growth.
Alibaba’s decision to postpone the IPOs of Cainiao and Freshippo comes amid a series of strategic moves. Earlier this month, the company announced plans to sell off several consumer sector assets, including Freshippo and retailer RT-Mart, to focus on its core e-commerce operations. This decision aligns with Alibaba’s strategic pivot under Tsai and CEO Eddie Wu towards focusing on its core e-commerce operations and shedding non-essential, unprofitable units.
According to data from Benzinga Pro, Alibaba shares closed 5.87% lower at 73.64 apiece in the U.S. on Wednesday and plummeted 6.81% during the early trading hours in Hong Kong on Thursday.
Read Next: China Stocks Surge After Beijing Announces New Measures, Xi Jinping Steps In
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