BABA Stock Crashes 10% In Hong Kong As $10B Equity Plan Triggers Dilution Fears: Retail Remains Firmly Bullish

• Alibaba’s move fanned both optimism and confusion among investors, especially since BABA stock is far from its peak.
• BABA dropped nearly 9% earlier on Friday following a tepid quarterly report.
• Stocktwits sentiment for the stock inched higher in the ‘extremely bullish’ zone. 

Alibaba Group Holding stock crashed nearly 10% in Hong Kong on Monday after the Chinese tech giant priced an 80 billion Hong Kong dollar ($10.20 billion) placement of newly issued shares to non-U.S. investors. 

Alibaba will issue 710 million new shares at HK$112.70 apiece, the company said in a press release on Sunday, compared with the stock’s Friday closing price of HK$123.

Alibaba will use the proceeds to invest in its full-stack AI capabilities, including expanding and enhancing its AI infrastructure. U.S. shares of BABA were down by 5% in overnight trading late Sunday at the time of writing, following an 8.6% drop on Friday after a tepid earnings report.

Record Equity Raise 

The deal is the largest primary follow-on offering by a Hong Kong-listed company in history, as well as the largest recorded Regulation S stock offering (for securities issuances and sales conducted outside the U.S.). It is also the third-largest primary follow-on stock offering globally this year, following those by Alphabet and Intel.

AI Spending Is Already Hammering Profit 

The move fanned both optimism and confusion among investors, especially since BABA stock is far from its peak. Shares are down about 37% from their all-time high last October.

Last week, Alibaba reported that its April-June net profit declined 75%, while total revenue grew a mere 9%, as AI investments were far higher than revenue generated from the new technology products.

Analyst, Retail View On BABA

“It’s one thing to sell stocks to fund AI after your stock has traded at new ATHs and stretched valuations while debt is expensive. A high stock price is arguably a partial validation of your AI efforts by the market. Neither is happening for $BABA. And yet. Makes you wonder,” Steve Hou, head of research at market intelligence firm Silicon Data, said in an X post.

“Mgmg effectively just signaled that organic cash flow isn't keeping up with their spend and this is likely just the beginning of the offering this cycle,” said Nicholas Mugalli, CEO, and Principal of World Trade Securities.

“Diluting shares to raise over ten billion dollars in fresh capital proves that balance sheet burn driven by aggressive AI Capex and price wars in ecommerce—finally caught up. For anyone watching Chinese tech, this is the ultimate white flag…Alibaba's core cash engine can't fund its multi front war against $PDD and Tencent on its own anymore.” he said.

On Stocktwits, BABA was the top trending stock at the time of writing, with retail sentiment climbing higher in the ‘extremely bullish’ zone. While some traders said they exited their positions citing the dilution fears, others were closely tracking the stock’s cloud growth and AI integration ahead of upcoming corporate updates.

“$BABA Does adding shares that worth of 3% of market cap make the fundamental worse? You need to ask this question to yourself,” a trader said.

Traders are closely cues for a V-shaped recovery back toward key resistance levels near $130. “$BABA historically, this will gap up hugely next week,” said a trader. 

Year to date, BABA stock is down 18%.

($1 = 7.84 Hong Kong dollars)

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