By Scott Murdoch and Jennifer Hughes
HONG KONG (Reuters) - Chinese e-commerce giant Alibaba Group <BABA.N> launched the share sale for its Hong Kong listing on Wednesday, braving unrest in the global financial hub to try to raise up to $13.4 billion (£10.47 billion) to fund its expansion plans.
The stock is due to start trading on Nov. 26 in Hong Kong, according to a term-sheet seen by Reuters.
The books for institutional investors looking to buy the shares opened during the New York trading session on Wednesday.
A 661-page draft prospectus for what looks set to be the world's biggest cross-border secondary listing shows Alibaba plans to use the money to invest in online delivery and local services platform Ele.me, as well as online travel group Fliggy.
It will also spend more on developing Youku, which Alibaba says is one of the leading online video platforms in China.
The plans come against the backdrop of slowing e-commerce industry in China, with Alibaba's annual Singles' Day shopping blitz recording its weakest sales growth since its 2009 debut.
The share sale, set to be Hong Kong's largest in more than nine years, is a boost for the city.
Hong Kong has sunk into its first recession in a decade as more than five months of street protests in which more than 2,300 people have been arrested as of last month, and worries about the U.S.-China trade war took their toll.
The progress of the protests is being monitored by Alibaba and its advisers, and is seen as a risk to the deal going ahead, according to people with direct knowledge of the matter.
The institutional book-building for the listing will run for a week and the stock is expected to be priced on or around Nov. 20, two people with direct knowledge of the process said.
A maximum price for the retail component of the deal will be announced next week, one said.
The people could not be named because the information has not yet been made public.
The company also intends to increase its investment in cloud computing and machine learning, the prospectus shows.
The Hangzhou-based company said Alibaba Cloud was currently the world's third largest Infrastructure as a Service business, by U.S. revenue in 2018, according to a study by Gartner.
The prospectus shows Alibaba has 960 million 'digital economy users' in China, including customers of its Ant Financial partnership.
The company said its revenue was 410.8 billion yuan ($58.7 billion)for the year to June 30, 2019, and the total assets on its balance sheet were worth 1.01 trillion yuan.
Alibaba had been planning to sell the shares earlier this year, but in August postponed the deal as the anti-government protests rocking Hong Kong since June became increasingly violent.
However, a person familiar with the transaction said Alibaba was confident it could overcome the negative sentiment in Hong Kong financial markets caused by the demonstrations.
Analyst James Cordwell from Atlantic Equities echoes the sentiment and said that an increasing likelihood of a deal in the U.S.-China trade war in the next few weeks helped the company undertake the listing now.
He said that while additional supply could weigh on the stock, over the longer run it could help the stock by broadening its investor base.
The deal had been initially expected to raise up to $15 billion, but 500 million primary shares will now be sold in the listing. Including a typical "greenshoe", or overallotment option, to sell some extra shares, the sale could raise up to $13.4 billion.
A sale of that size would dilute existing shareholders from the company's New York listing by 2.8%, and investors would be able trade shares between the two exchanges.
Alibaba's U.S.-listed shares were down 2.7% at $181.94 in morning trade.
The Hong Kong shares are expected to be offered at a discount of up to 5% of the U.S. equivalent.
At $13.4 billion, Alibaba’s share sale would rank as the world’s largest follow-on share sale targeting an entirely new stock exchange, according to data from Dealogic.
Alibaba holds the world record for an initial public offering (IPO) with its $25 billion New York flotation in 2014, but could shortly lose the crown to Saudi Arabia’s Aramco.
The oil producer is expected to raise between $20 billion and $40 billion in an IPO expected to price in the coming weeks.
(Reporting by Scott Murdoch; Writing by Jennifer Hughes; Editing by Kim Coghill, Mark Potter and Tomasz Janowski)