This article first appeared on GuruFocus.
Alibaba Group (NYSE:BABA) shares dropped 10% in early Monday trading after the company set terms for a major equity placement.
The Chinese technology company priced 710 million newly issued ordinary shares at HK$112.70 each, generating HK$80 billion, or about $10.3 billion. The price represented an 8.4% discount to Alibaba's previous closing level.
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Alibaba said the proceeds will be directed entirely toward expanding its artificial intelligence capabilities. The spending is expected to cover AI infrastructure and other investments aimed at developing its full-stack AI operations.
The transaction adds new shares to Alibaba's outstanding equity base, while the discounted pricing may weigh on existing shareholders in the near term. The placement is scheduled to close on Aug. 26, subject to completion conditions.
Alibaba's decline reflects investor pressure following the discounted share placement, while the AI investment could shape the company's longer-term growth strategy.