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Alibaba - Freshippo IPO - cancellation - economy - China: Alibaba postponed Freshippo IPO due to the economic situation in China

Article: Alibaba postponed the Freshippo IPO due to the economic situation in China

Source: https://ru.investing.com/news/stock-market-news/article-2290336

Context:

Investing.com - Chinese online retailer Alibaba postponed the initial public offering of its subsidiary Freshippo grocery chain amid weak interest in consumer sector stocks, writes Bloomberg with reference to its sources.

The agency notes that after the first negotiations with potential investors, the Chinese technology giant came to the conclusion that the value of Freshippo at the initial public offering would be only about $4 billion, which is lower than initial expectations, which were estimated in the range of $6-10 billion.

What is meant - in simple words.

Alibaba has decided to sell its subsidiary by issuing shares. It is not specified by what percentage of the total amount of the authorized capital. But the point is, if Alibaba has taken such a step, then the corporation is experiencing problems in financing its subsidiaries and is trying to solve them by exchanging its property for the financial liquidity of the outside world (public investors) by selling its securities through the exchange.

As you can see, the Chinese high-tech giant did not prefer as a source of borrowed capital in the domestic market (Chinese banks), which is either very expensive (high interest rates) or there are any restrictions.

Usually, the value of issued shares for an IPO with the existing infrastructure should not be lower than its book value of net assets, which determines their minimal attractiveness to the one who issues them. If Alibaba postponed the Freshippo IPO, then this can only indicate that either the company overestimates its assets strongly (wants to hit the jackpot), or the value offered by the market leads it to losses and then everything is very bad with its economy.

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