Rumors are circulating that Chinese internet giant Alibaba plans to list in mainland China, perhaps as soon as this summer. Squali points out that “historically, companies incorporated overseas (in Aliababa’s case the Cayman Islands) were prohibited by law to sell shares to local Chinese investors. It appears that Alibaba’s robust share performance since its IPO in NY, its market cap at $~500B, its global franchise and the missed investment opportunity for local investors are leading regulators to look into altering the rules. If this change takes effect, it may encourage BABA to consider a dual listing on a Chinese exchange, and ensure that future Chinese tech IPOs (Ant Financial for one) choose a dual listing.”
“While the exact method of BABA’s potential local listing is still unknown, the WSJ indicates that Chinese banks would create depository receipts, which is consistent with our view that BABA is not likely to list locally by selling new shares. This is in part because of its cash rich balance sheet, and in part to avoid any unnecessary dilution from new share issuance,” the analyst added.
Squali rates BABA shares a Buy with a $225 price target, which implies a 16% upside from current levels.
Wall Street tends to agree with the analyst’s confidence on the e-commerce giant, considering TipRanks analytics reveal BABA as a Strong Buy. Out of 17 analysts polled in the last 3 months, 17 are bullish on Alibaba stock. With a return potential of nearly 21%, the stock’s consensus target price stands at $235.69.