Alibaba chip unit T-Head files for Hong Kong IPO

Alibaba Group ↘ 2.12% said on Tuesday, November 10, that its chip design unit T-Head has confidentially filed to list in Hong Kong. The stock exchange has cleared the company to go ahead with the spin-off. T-Head submitted a confidential Form A1 listing application on September 11 for an offering that would combine a Hong Kong public share sale with an institutional placement, Reuters reported. The deal's size, its structure and the stake Alibaba will keep after the listing have not been decided.centraloregondaily.com

The filing makes T-Head the first standalone Alibaba unit to pursue an IPO since the group began its corporate restructuring in 2023, according to the South China Morning Post, which Alibaba owns.scmp.com

Approvals still pending

The listing still needs approval from the Listing Committee of the Hong Kong Stock Exchange, and a filing with the China Securities Regulatory Commission must be completed, according to Investing.com. Alibaba also got a waiver from the exchange's rule that would normally give existing shareholders an assured entitlement to shares in the spun-off company. It said such an entitlement would bring disproportionate costs, including possible US securities registration requirements and restrictions under Chinese law on distributing shares. The company warned that the spin-off may not be completed, and it gave no timeline.ca.investing.com

T-Head is wholly owned by Alibaba, makes full-stack data center chips in China, and is expected to stay a subsidiary after the listing, Bloomberg reported. Alibaba said a separate listing would let investors value the chip business on its own. It would also give T-Head direct access to equity and debt markets and make it easier to get bank financing.theedgemalaysia.com

Fundraising estimates

Alibaba has not disclosed a target amount. International Financing Review had reported that the share sale could raise $2 billion to $3 billion, according to The Standard. JPMorgan ↗ 0.05% analysts have put T-Head's potential valuation at about $25 billion to $62 billion, Futu News reported. The same report said Alibaba's Hong Kong shares opened lower on November 10 after the IPO news.thestandard.com.hk+1

"By tapping the public market for funding, T-Head brings in external capital, avoiding the need for the group to shoulder heavy capital expenditures alone," Mike Leung, an investment manager at Wocom Securities, told the Post. He added that volatile valuations and slow regulatory clearance are the main headwinds for large chip IPOs.scmp.com

China's chip push

The listing comes as China pushes to become self-sufficient in technology. In September, T-Head unveiled its Zhenwu V900 AI chip, which Alibaba says delivers three times the performance of its predecessor and is expected to reach mass production in the first quarter of 2027, The Standard reported. Hong Kong IPOs raised HK$403.9 billion in the first 10 months of the year, close to the 2010 record, though activity has cooled this quarter, according to the Post. Alibaba reports third-quarter earnings on November 19.thestandard.com.hk+1