Alibaba Group (NYSE: BABA) Looking at U.S. Initial Public Offering, As Portends a Bleak Future

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    Alibaba Group Holding (NYSE: BABA) surges over 1.5% in pre session on Thursday after the firm’s international online retail subsidiary is considering a U.S. initial public offering, citing individuals familiar with the situation, Bloomberg News reported on Thursday.

    The e-commerce behemoth is still in the planning phases, and the scale of the IPO has yet to be established, according to the article.

    According to the story, the business group is in negotiations with banks about potentially assisting with the IPO next year. “Currently, there is no IPO plan,” Alibaba Digital Commerce Group said in an emailed statement to Reuters.

    In March, Alibaba announced plans to split into six divisions and seek fundraising or listing opportunities for the majority of them, as part of a significant overhaul as China promises to soften a broad regulatory crackdown and promote its private firms.

    Analysts at the time predicted that the split would reduce attention on the computer behemoth, whose enormous operations had been a focus of authorities for years.

    Alibaba’s Fading Rally Portends a Bleak Future

    It only took four weeks for the excitement around Alibaba Group Holding Ltd.’s separation plan to fade. Restoring it will most likely be a difficult task.

    Alibaba’s American Depositary Receipts are currently 2.3% lower than they were before the e-commerce business unveiled its restructuring plan in late March, wiping away up to 20% of gains. Investors had believed that dividing the empire into six pieces would improve the empire’s worth and increase the likelihood of those divisions going public, reversing the problems caused by the abrupt cancellation of Ant Group’s initial public offering in 2020 due to Beijing’s fears over influence.

    However, as geopolitical tensions between the United States and China rise, some are beginning to reconsider their earlier optimism. Concerns about widespread deterioration in Chinese equity sentiment, as well as doubts about the prospective IPO pipeline and a lack of growth catalysts, are also impacting on the stock’s prospects.

    “Whatever valuation gains from Alibaba spinning off and separately listing its business units may be tempered by the weak sentiment towards China because those IPOs will be harder to execute and valuations may be lower,” said Vey Sern Ling, managing director at Union Bancaire Privee.

    Alibaba’s post-spinoff failure indicates a larger concern about China’s economic recovery trajectory. According to Bloomberg-compiled statistics, experts have reduced their profits projection down by about 5% since March as a barometer for the nation’s purchasing trends. Concerns include a sky-high unemployment rate and slowing private investment.