- Money may be used to help fund family office Blue Pool Capital
- Credit Suisse, Goldman Sachs, Morgan Stanley working on deal
Alibaba Group Holding Ltd. Chairman Jack Ma and Vice Chairman Joseph Tsai are planning to raise more than $2 billion through a margin loan pledged against the company’s stock, according to people familiar with the matter.
The money raised may be used to fund Blue Pool Capital Ltd., the family office of Alibaba set up by Tsai, two of the people said, asking not to be named as details aren’t public. Credit Suisse Group AG, Goldman Sachs Group Inc. and Morgan Stanley are among banks working on the transaction, they said.
The loan may be announced as early as this month, after a lockup period on stock owned by Ma and Tsai expires on Sept. 21, one of the people said. No final decision has been made and the deal may still fall through, they said.
Both men are billionaires with considerable stakes in Alibaba, which creates a challenge in broadening their personal holdings without panicking Alibaba investors, said Gil Luria, an analyst at Wedbush Securities in Los Angeles.
“Since Mr. Tsai said publicly on the last earnings call that he and Mr. Ma will not be selling shares at the lockup expiration, this may be their best way for diversifying their personal portfolio without breaking a promise,” Luria said.
In a margin loan, a borrower secures a loan by pledging an asset, and typically agrees to hand over cash to the lender if the value of the collateral declines. The lender can usually sell some of the collateral if the borrower is unable to post cash. Banks are keen to do these deals because of the lucrative fees.
Ma is China’s second-richest person with a net worth of $29.5 billion, while Tsai has a $4.4 billion fortune, according to the Bloomberg Billionaires Index.
“Share financing is very common for founders and senior executives who hold such a strong belief in the future growth potential of their companies,” Jim Wilkinson, a spokesman for Alibaba, said Thursday. “This is prudent financial planning and management.”
Representatives for Credit Suisse, Goldman Sachs and Morgan Stanley declined to comment.
Shares of China’s largest e-commerce company fell in August below their listing price for the first time since the initial public offering in September 2014, and saw their third straight monthly decline amid a global market retreat and concerns about slowing sales growth in China. The stock climbed 1.4 percent Thursday to $66.47 at the close in New York, giving the company a market value of $167 billion.
Ma and Tsai are participating in a share buyback of as much as $4 billion at Alibaba, according to a regulatory filing.
Alibaba reported a 28 percent increase in revenue for the quarter that ended in June, down from an average of 56 percent in the previous 12 quarters. The company is facing an e-commerce market saturation in China’s larger cities and a domestic economy growing at the weakest pace since 1990.
Blue Pool was set up by Tsai and Alexander West in 2004 as a hedge fund manager. Earlier this year it hired former Citadel Managing Director Oliver Weisberg to co-run the firm, which now manages Tsai’s wealth and that of some other Alibaba founders.
The family office has also brought in Sydney Zhang, a former allocator from the Chinese foreign exchange regulator, to lead hedge-fund investments, a person with knowledge of the matter said in May.