Alibaba Shares Drop Following 80 Billion Hong Kong Dollar Share Sale

Alibaba shares fell up to 10 percent in Hong Kong on August 24, 2026, after the Chinese technology conglomerate priced an 80 billion Hong Kong dollar ($10.20 billion) share placement to non-U.S. investors to fund its artificial intelligence expansion.

The company issued 710 million new shares at HK$112.70 per share, representing a discount to its previous closing price of HK$123, while its U.S.-listed stock slid 3.4 percent in premarket trading.

The fundraising follows a 75 percent drop in net profit for the June 2026 quarter as capital expenditure rose 75 percent to 67.7 billion yuan for computing infrastructure.

To support its infrastructure buildout, Alibaba dramatically shifted its capital strategy by reducing buybacks by 80 percent year-over-year to $162 million, down from $815 million in the same period a year earlier.

Free cash flow declined to negative 44.67 billion yuan, while the company's newly disclosed AI Labs and Applications division reported an adjusted EBITA loss of 13.86 billion yuan.

Addressing analysts during an August 20 call, chief executive officer Eddie Wu framed the capital allocation pivot around long-term growth priorities.

"AI has become Alibaba's most certain growth engine," said Eddie Wu, CEO at Alibaba.

Management emphasized that hardware investments typically achieve break-even within three years of operation, while chief financial officer Toby Xu supported the financial strategy.

"Our AI plus cloud investment has a clear path to attractive ROIC," said Toby Xu, CFO at Alibaba.

Financial firm UBP noted that Alibaba's integrated technical infrastructure positions the company to capture long-term sector growth despite short-term margin pressure.

"I think Alibaba clearly is well positioned to chase that growth, given that they have a cloud computing arm, they have a very strong AI model," said Vey-Sern Ling, senior equity advisor at UBP.

To raise additional capital, Alibaba divested non-core assets including its gaming unit Lingxi Games to Trustar Capital for at least $1.5 billion, while cloud division revenue rose 38 percent year-over-year to 41.63 billion yuan.