Alibaba scraps IPO of logistics unit Cainiao, says it will take full ownership

Alibaba has announced the cancellation of its planned IPO for Cainiao, adding to the company’s recent struggles.

The cancellation of the planned IPO, which would have provided a capital injection to Alibaba through a crucial exit deal, comes as market conditions in China deteriorate.

Investors have recently turned on China, concerned about a slew of challenges, including slowing demand and a real estate and debt crises.

Alibaba announced in a press release on Tuesday that it was withdrawing its IPO and listing application for Cainiao, as well as buying the remaining shares of the firm that it did not already hold.

Alibaba’s American depositary receipts were practically flat in premarket trading in the United States as of 6:50 a.m. ET on Tuesday.

Alibaba presently holds a 64% interest in Cainiao. It plans to invest up to $3.75 billion in acquiring the remaining 36% from minority investors and employees with vested equity.

Alibaba’s chairman, Joe Tsai, said in a statement that the company decided to cancel Cainiao’s planned IPO and instead take full ownership of the business because “we believe this is an appropriate time to double down” on logistics investment.

Alibaba said the bid valued Cainiao at $10.3 billion. Cainiao, which Alibaba originally launched in May 2013, offers warehousing and fulfillment services, last-mile delivery and pick-up points, and reverse logistics to customers of Alibaba’s Taobao and Tmall e-commerce platforms.

Hong Kong, where Alibaba and Chinese tech peers Tencent, Baidu, and JD.com are listed, has not followed the same rising trend as its US and European counterparts.

Hong Kong’s Hang Seng index has fallen by almost 15% during the last year. In contrast, the Dow Jones Industrial Average and Euro Stoxx 600 indexes have increased by 21% and 15%, respectively, over the same time period.

Technology equities, in particular, have performed poorly in China. Alibaba’s stock has fallen roughly 18% in the last 12 months. Tencent, Baidu, and JD.com are down by 20%, 30%, and 32%, respectively.