Alibaba's $1.5B Bond Move Hints at Bigger Bet--But Not on China
Warning! GuruFocus has detected 2 Warning Signs with BABA.
It's a playbook we've seen before. Earlier this year, Baidu used a similar structure to raise $2 billion via Trip.com-linked exchangeables. These types of bonds offer companies a way to trim stakes in subsidiaries while keeping upside optionality alive. For Alibaba, the timing may be more than financial housekeeping. By tapping this route, the company may be signaling that it sees better return opportunities elsewherenamely, in its cloud infrastructure and international commerce business, where proceeds are expected to be reinvested.
JPMorgan, UBS, Citi, and Morgan Stanley are running the books on the deal. For investors, the structure raises some interesting questions: Will Alibaba Health see enough momentum to hit the premium? Will Alibaba's core betscloud and global e-commercedeliver the returns needed to justify the trade-off? This isn't just a capital raiseit could be a signal of what Alibaba sees coming next.
This article first appeared on GuruFocus.
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