Alibaba Founder Jack Ma

Alibaba could raise $12.9 billion after pricing a secondary listing in Hong Kong at a slight discount to its U.S.-listed shares in what would be the biggest initial public offering of the year.

The Chinese e-commerce giant said Wednesday it was issuing the Hong Kong shares at HK$176, or $22.50, each — equivalent to a discount of 2.9% on the New York shares. Eight Hong Kong-listed shares are worth the equivalent of one New York-listed share.

At that price, the offering would raise HK$88bn ($11.3 billion) but that amount could rise to $12.9 billion if bankers exercise a “green shoe” option to sell additional shares to investors. Alibaba had set a ceiling last week of HK$188.

“Secondary listings are an art form, not an exact science,” Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, told CNN.

Alibaba wants to make sure its Hong Kong listing generates a lot of interest, so “they’re pricing at a level where I’m 100% sure those shares are going to be a lot higher on the day,” he added.

The offering is heavily oversubscribed amid stronger-than-expected demand. Despite its reduced size, it would easily top the $8 billion raised by Uber in New York in May and the $5 billion share sale by Anheuser-Busch InBev’s Asia-Pacific unit in September.

“The enthusiasm is a vote of confidence in the Asian financial hub, which has been rocked by months of civil unrest,” CNN said.

Hong Kong’s economic activity was down more than 3% in the three months to September as a result of a downturn in exports and a collapse in consumer and tourist spending.

Jasper Lawler, the head of research at London Capital Group, said Alibaba’s decision to list in Hong Kong was more strategic than financial.

“The advantage for Alibaba is twofold: it can diversify its shareholder base during the U.S.-China trade war and it can command a high price, in part because investors in Hong Kong are clamoring for something positive amid the protests,” he told The Guardian.

Photo by VCG/VCG via Getty Image

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