Alibaba Group Holding Ltd. top executives Chairman Jack Ma and Vice Chairman Joseph Tsai have been reportedly planning to raise more than $2 billion through a margin loan. (Photo : www.ozy.com)
Alibaba Group Holding Ltd. top executives Chairman Jack Ma and Vice Chairman Joseph Tsai have been reportedly planning to raise more than $2 billion through a margin loan pledged against the company's stock, sources familiar with the matter said.
The China Daily, citing sources who asked not to be named, said that the money that will be raised could possibly be used to fund Blue Pool Capital Ltd., Alibaba's family office set up by Tsai.
According to the sources, the banks that are working on the transaction include Credit Suisse Group AG, Goldman Sachs Group Inc. and Morgan Stanley.
One of the sources told China Daily that the loan may be announced after the expiration of a lockup period on stock owned by Ma and Tsai on Sept. 21. The sources said that no final decision has been made on the the deal, which may still fall through.
Gil Luria, an analyst at Wedbush Securities Inc. in Los Angeles, said that the two executives, who are both billionaires with considerable stakes in Alibaba, can create a challenge in expanding their personal holdings without scaring Alibaba investors.
"Since Tsai said publicly on the last earnings call that he and Ma will not be selling shares at the lockup expiration, this may be their best way for diversifying their personal portfolio without breaking a promise," Luria said.
A margin loan allows a borrower to secure a loan by pledging an asset. Under this loan deal, the borrower agrees to turn over cash to the lender if the value of the collateral declines. The lender can also sell some of the collateral if the borrower would be unable to bring the cash. Banks are often interested to enter these deals because of the profitable fees.
The Bloomberg Billionaires Index showed that Ma has a net worth of $29.4 billion and Tsai $4.3 billion.
"Share financing is very common for founders and senior executives who hold such a strong belief in the future growth potential of their companies," Jim Wilkinson, a spokesman for Alibaba, said on Thursday, Aug. 3. "This is prudent financial planning and management."
Representatives for Credit Suisse and Goldman Sachs did not comment, while officials at Morgan Stanley did not respond to media request for comments, the report said.
