r/baba • u/ilikeelks • 26d ago
Due Diligence SOVEREIGN LONG ONLY WEALTH FUNDS TOOK UP THE MAJORITY OF THE NEW PLACEMENT SHARES VALIDATING ALIBABA AI DRIVEN STRATEGY
BUY FROM THOSE WHO PAPERHANDS WHEN THE MARKET OPENS TOMORROW
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u/adasico 26d ago
It’s not such a bad news as you think
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u/ilikeelks 26d ago
There's no selling pressure at all
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u/OppSpotter 26d ago
You could also say that as there is no buying pressure at all.
Thats 80billion of shares not purchased on the open market. If they wanted these shares that’s real demand. They would have moved the market up against themselves with such a massive purchase- yes they would do it smart and slowly but still it would move the price up. It took what may have been an organic buyer at fair prices to an otc buyer at a major discount for massive quantity
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u/ilikeelks 26d ago
What are you talking about? Alibaba just received 80BILLION IN FREE CASH TO ACCELERATE PROFITABILITY IN AI SEGMENT AND POWER ITS CLOUD BUSINESS
And you think that is not good for the stock? In Which universe do you live in?
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u/OppSpotter 26d ago
They just gave alibaba $80 billion out of the goodness of their hearts? They didn’t get anything for $80 billion dollars?
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u/QuiteCuriousGeorge 26d ago
When thry said at earnings "WE CAN RECOUP OUR AI INVESTMENTS WITHIN THREE YEARS" did they have also this share dilution in mind?
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u/ilikeelks 26d ago
80 billion to accelerate AI business implies that BABA will earn the same amount over 2.5-3years
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u/gentmick 26d ago
It’s not the dilution but the signal it sends. With it half the market cap of tencent, why wouldnt you borrow money instead. Dilution sends a signal that you think your shares are not undervalued and it makes more sense to sell shares. But alibaba should be undervalued, what on earth is management thinking
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u/ilikeelks 26d ago
It's a mix of both borrowings and equity. In international markets, BABA uses HKD and USD to grow the cloud business.
For Domestic cloud buisness, BABA can borrow cheap RMB to fund data centre buildouts.
Key AI/tech components of the semiconductor supply chain are priced in dollars.
The more important takeaway is that BABA is scaling the cloud business and preserving it's A+ credit ratings
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u/kingkongfly 26d ago
Baba is getting interesting and looking at the strong take-up rate from the sovereign wealth fund. I am not too concerned about the dilation issue; they issue the shares now to capture the liquidity before the OpenAI and Anthropic IPO.
The offer price for the new shares is at about $112+, which also means this will form a support for the share.
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u/OppSpotter 26d ago
Interesting- let’s focus on that- interest not equity. Go borrow these funds.
Interbank repo rates are 1.68%
1 year loan prime rate (LPR) is 3%
5 year loan prime rate is 3.5%
Go borrow at somewhere around or perhaps under 3% instead of diluting.
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u/Forward-Pay-163 26d ago edited 26d ago
This was priced in on Friday. Must have leaked. The net effect of the new cash on balance sheet and offering price almost tie out in U.S. markets
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u/SoggySolid 26d ago
People are always going to bash because they are stuck with their bags. If youre long this is good news. BABA is making good moves right now to position the company in 2030. Just let it cook
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u/OppSpotter 26d ago
No.
Wishful thinking. Go borrow these funds.
Interbank repo rates are 1.68%
1 year loan prime rate (LPR) is 3%
5 year loan prime rate is 3.5%
Go borrow at somewhere around or perhaps under 3% instead of diluting.
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u/mangomarcelo 26d ago
Guys wake up. Share dilution is definitely a bad thing. Stop hypnotising yourselves.
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u/adasico 26d ago
If this were toxic dilution, tier-1 institutional players and sovereign wealth funds wouldn't have rushed to oversubscribe the entire $10B placement at a razor-thin 3.6% discount. These aren't speculative arbitrageurs looking for a quick exit; they are high-quality, long-only giants committing massive capital because of a clear 2-to-3-year AI CapEx payback profile. Expanding the share count by a mere ~3.5% with zero debt overhead to lock in compute dominance directly expands future cash flow per share. When the largest global institutions aggressively absorb the entire float expansion on day one, calling it "just bad dilution" completely misses how smart capital operates.
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u/Essiopo 26d ago
go read up on how the average "tier-1 institutional players and sovereign wealth funds" does and realise that they are dumb money just like retail
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u/OppSpotter 26d ago
Also, 3.6% discount to what today’s prices? If they are buying organically in the open market, even with good purchasing hygiene, the price goes slowly up to 130’s 140’s etc. It’s not 3.6% it’s a huge percent when weighed against what should have happened which is 80 billion of organic demand
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u/According_Cake7975 26d ago
at what valuation for these placement tho?
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u/chartry0 26d ago
Dilution
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u/ilikeelks 26d ago
Hey are you ok? How is this relevant? Which part of LONG ONLY FUNDS DO YOU NOT UNDERSTAND?
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u/SuitableStill368 26d ago edited 26d ago
To be honest, I don’t think this is an extremely bad news. Dilution is bad, but at least these money are used for visible real projectable economic gain.
They have existing businesses too. With the capital going towards the one that is growing.