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Alibaba Proposes Stock Split To 'Increase Flexibility' Ahead Of Capital Market Activities

Jayson Derrick

Shareholders of China-based e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA) will vote July 15 at the company's annual meeting to accept or reject an eight-for-one stock split, CNBC reported.

What Happened

Alibaba is proposing an eight-for-one stock split that will increase shares outstanding from four billion to 32 billion, according to CNBC. The proposal is part of management's desire to "increase the flexibility" ahead of future capital market activities, including a $20 billion potential IPO in Hong Kong.

"Among other reasons, the one-to-eight share subdivision will increase the number of shares available for issuance at a lower per share price, and the Board of Directors believes that this will increase flexibility in the Company's capital raising activities, including the issuance of new shares," a statement obtained by CNBC read.

Why It's Important

CNBC said Alibaba has multiple reasons to proceed with a stock split, including making shares more attractive to new investors at a lower price point. When Alibaba went public for the first time on the U.S. market in 2014, shares were priced at $68. At time of publication, the stock was hovering around the $160 per share mark.

Alibaba would join other global tech heavyweights who initiated stock splits. Most notably, Apple Inc. (NASDAQ:AAPL) oversaw a seven-for-one stock split in 2014 when shares traded at around $700 per share. The company's board of directors felt the high price tag of a single share dissuaded many investors looking to buy a smaller position.

If shareholders approve the stock split, it will take place no later than July 15, 2020.

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