2014-02-14

No Alibaba Backdoor IPO

Investment by Alibaba Creates Frenzy Over Chinese Pharmaceutical Data Firm
Shares in the state-backed company Citic 21CN soared as much as 500 percent in Hong Kong on Friday after it said that the Alibaba Group, the Chinese Internet behemoth, had acquired a controlling stake in it for 1.3 billion Hong Kong dollars, or $170 million.

Tremendous buying among local speculators pushed trading volumes in shares of Citic 21CN — a small technology company that operates a pharmaceutical data platform in China — to more than 100 times their average volumes, as investors made big, bold bets that Alibaba might try to use the company as a shell for a backdoor stock market listing. Citic 21CN shares finished at 3.92 dollars, or 372 percent above the last closing price.

Those trades may prove overly optimistic.

‘‘There’s no intention to do a backdoor listing,’’ one person familiar with the companies’ plans said Friday.
Alibaba is buying shares at 30 cents and they now trade for more than 3 dollars: not a bad days work, though the price will tumble once people realize no IPO is coming.

So why is Alibaba buying a pharmaceutical data firm?
Chinese Internet giants have been expanding into nontraditional areas with their recent acquisitions.

In the past week, Tencent Holdings said it would pay nearly $200 million for an operator of warehouses and factory outlet malls, and a provider of logistics services. In December, Alibaba invested about $360 million in the Haier Group, one of China’s biggest manufacturers and distributors of household appliances, in a deal that joins the two companies in a new logistics business partnership.

By branching into drug data services, Alibaba can leverage its deep technical expertise and data gathering and processing capabilities to try to capture demand for information in China’s sprawling and tightly regulated pharmaceutical supply market.

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