Jack Ma, Chairman of Alibaba Group and Vice Chairman Joseph Tsai are looking to borrow $2 billion using Alibaba shares as collateral, according to a report released by Bloomberg on Friday.
The loan, which could be announced as soon as this month, could potentially be used to fund Blue Pool Capital Ltd., the family office created by Joseph Tsai designed to reinvest the wealth created by Alibaba’s $25 billion USD IPO last year.
Ma is now reportedly worth $27 billion USD while Tsai has an expected wealth of $7 billion, owning approximately 7.6% and 3.1% of Alibaba stock respectively.
Banks working on the potential loan include Credit Suisse, Goldman Sachs and Morgan Stanley. A lockup period placed on the shares owned by Ma and Tsai will expire on the on the 21st of this month, though neither has indicated they will sell off stock, which could potentially cause unease among investors. Lending against the stock is a means of avoiding this while expressing confidence in the potential of the company.
The loan will be a margin loan, meaning that if the value of Alibaba stock lowers considerably, Ma and Tsai will be required to hand over cash to match the value of the loss. They will also have the option to sell stock to pack back the loan.
Alibaba has had a tough couple of weeks amid economic turmoil on China’s stock markets. The giant’s stock price dipped below their IPO price of $68.00 USD, losing just over 45% from their highest trading point November. The company has since continued its downward slide, now resting at just under $64.00 USD per share.
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