Alibaba's logistics unit Cainiao files IPO in Hong Kong

This week, Cainiao officially filed to go public in Hong Kong.

Alibaba's logistics unit Cainiao files IPO in Hong Kong
A man walks past a logo of Alibaba Group at its office building in Beijing, China August 9, 2021. REUTERS/Tingshu Wang//File Photo

The backstory: Back in 2013, Alibaba Group, the e-commerce giant, gave birth to Cainiao, its logistics branch. It wanted to supercharge the delivery network for Alibaba's online stores in China. Think of it as behind-the-scenes wizardry that makes sure your online orders reach your doorstep – and quickly. Cainiao, which means "rookie" in Chinese, promised speedy deliveries within 24 hours in China and 72 hours worldwide. To pull this off, the company has partnered with over 500 logistics companies worldwide and now has 18 distribution hubs across the globe, as of July.

Despite running at a loss initially, Cainiao's revenue soared. The company even handled over a billion packages last year during Alibaba's Singles' Day shopping festivity, similar to Black Friday in the US.

More recently: Alibaba has recently been going through some major changes. In March, it made headlines with its biggest restructuring in 24 years when it split into six separate units, each with its own CEO and board of directors. These units can each go for independent listings or fundraising. Then, in June, Eddie Wu stepped up as CEO following Daniel Zhang's transition to Alibaba's cloud division and his move to lead a new investment fund.

The development: This week, Cainiao officially filed to go public in Hong Kong. This move has put the unit in the spotlight alongside other divisions of Alibaba that are eyeing the public stage. But it’s the first among these subsidiaries to submit an application for an initial public offering (IPO). To make this happen, it’s got some heavy hitters on its side. Big financial players like Citic Securities, Citigroup and JPMorgan Chase are teaming up to sponsor this IPO. Alibaba hasn't provided any details on the exact terms of the offering just yet, but sources have said that it could raise at least US$1 billion.

Key comments:

“The appointment of the internationally-focused Tsai as chairman aligns perfectly with the outward-looking strategy that Alibaba has recently adopted, with big investments in Lazada and the recently-announced plans to open a local version of Tmall in Europe,” said Jacob Cooke, CEO of WPIC, an e-commerce tech and marketing firm that helps foreign brands sell in China, to CNBC.

"The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready," wrote Daniel Zhang, CEO of Alibaba, in an email to employees, according to Alibaba's own Alizila news site.

“If they are going to provide their existing stockholders the option to subscribe, or if they are going to spin-out these units instead of raising fresh capital, then they might have to do the listing in Hong Kong as not everyone will have access to A-shares market,” said Sumeet Singh, head of equity research, IPOs and placements at Aequitas Research Pvt, referring to Alibaba’s announcement of dividing into six units.