Alibaba-backed Huitongda gets green light for Hong Kong listing, testing investor appetite for big deals in the city
- Huitongda, an commerce platform backed by Alibaba, will start its investor education process this week, sources say
- The Hong Kong bourse’s listing committee gave its approval for the company to move forward with an IPO as it aims to raise US$500 million to US$1 billion
Huitongda, the commerce platform targeting merchants and suppliers in China’s lower-tier cities, has won a green light from the Hong Kong stock exchange’s listing committee and will start an investor education process this week, according to people familiar with the transaction.
Huitongda, in which Alibaba (China) Network Tech holds a 19.1 per cent stake, is aiming to raise between US$500 million and US$1 billion, according to these people, who asked not to be named because they are not authorised to speak publicly about the deal. Network Tech is a subsidiary of Alibaba Group Holding, which owns the South China Morning Post.
If the pre-marketing goes smoothly, Huitongda is targeting to proceed with the IPO’s book building process later this month, although the timing could still change as a share sale is subject to prevailing market conditions, these people said.
Last year, the Hang Seng Index fell 14 per cent, making Hong Kong the worst-performing market out of 92 major indexes tracked by Bloomberg. Investors’ appetite for IPOs was dampened by the stocks’ post-trading debut performance, as 70 per cent of the 96 listings in Hong Kong were trading below their offering price by December 31.
This came as Hong Kong also lost its 2020 ranking as the world’s second-biggest IPO venue last year, as Beijing started undertaking a range of regulatory reforms in July to crack down on technology companies and private tutoring businesses. This, together with a wave of reforms proposed to counter cybersecurity risks and bolster data security, have dried up new listings, particularly during the last quarter.
A successful listing by Huitongda could test investors’ appetite for IPOs and usher in this year’s first sizeable deal after China’s artificial intelligence giant SenseTime successfully raised HK$6.64 billion (US$851.4 million) last month.
With more than 60,000 active users and nearly 5,000 suppliers, the Nanjing-based firm sells six categories of merchandise ranging from auto parts, agricultural production gear, liquor, household appliances and homebuilding materials.
In 2017, it also launched a software-as-a-service business that provides merchants on its platform with retail management, online storefront and data analytics solutions.
For the nine months ended September, Huitongda booked a net loss of 157.9 million yuan (US$24.7 million), narrowing from a net loss of 306.2 million yuan, according to its preliminary prospectus filed to the Hong Kong Exchanges and Clearing (HKEX) last month.
Total retail sales of consumer durables and agricultural equipment in China’s lower-tier market are expected to grow to 7.3 trillion yuan in 2025, from 4.7 trillion yuan in 2020, according to Frost & Sullivan’s estimates cited in Huitongda’s prospectus.
Huitongda plans to use the net proceeds to expand its customer base, further digitalising its internal information technology systems and enhancing its data analytics capabilities, along with expanding its headcount.
China International Capital Corporation (CICC), Citigroup and China Renaissance are the joint sponsors of the deal. These banks were not immediately available for comment.
Author: Georgina Lee, SCMP