$JD.com (JD.US)$Issuing convertible bonds,$Alibaba (BABA.US)$They also followed suit, and who could come later?

On Thursday, people familiar with the matter reported that Ali is considering issuing convertible bonds and plans to raise about 5 billion US dollars. After that, Ali's Hong Kong stock fell by more than 5%.

On Thursday evening, Beijing time, Alibaba issued an announcement on the Hong Kong Stock Exchange stating that it plans to issue convertible senior notes with a total principal amount of 4.5 billion US dollars and expiring in 2031. According to the announcement, Ali expects to grant initial purchasers of notes the right to purchase additional notes with a total principal amount of up to US$500 million, and can exercise the relevant options within 13 days from the date the notes are issued (including the day). As a result, the deal will raise up to $5 billion.

Ali said it plans to use the net capital raised from the issuance of the notes to: buy back a number of Alibaba American Depositary Shares according to the existing share repurchase plan while issuing and pricing the notes; fund further share repurchases from time to time based on the company's existing share repurchase plan; and fund the costs required to establish capped call transactions (capped call transactions).

During the US stock session on Thursday, Alibaba's US stocks closed down more than 2%. In the past 5 trading days, Alibaba's US stocks have fallen by more than 7%.

Earlier, on May 21, JD announced that it plans to issue convertible bonds with a total scale of 1.75 billion US dollars. Since then, JD Hong Kong stocks have been falling for three consecutive days, and once again fell by more than 4% on Thursday.

JD said that the issuance of this convertible bond will enable it to use low financing costs (0.25% coupon rate) to speed up the share repurchase process at the current stock price. The conversion price is 45.7%, and the market price premium is about 35%.

In response, HSBC stated:

It is no surprise that Internet companies use the bond market to enhance shareholder returns. In the current high interest rate environment, convertible bonds provide a better financing option compared to ordinary bonds.

JD's decline was no surprise. Historically, after Internet companies issued convertible bonds, stock prices often fell in the short term. Over the past three years, the stock price dropped an average of 8% on the first day after the announcement, and fell 23% on the 30th day.

Who will likely continue to follow up? HSBC believes that:

preferences$MEITUAN-W (03690.HK)$,$TENCENT (00700.HK)$,$NTES-S (09999.HK)$und$PDD Holdings (PDD.US)$We estimate that Meituan and Tencent are the companies most likely to issue convertible bonds, while NetEase is likely to remain more defensive.

Investors should pay attention to four major indicators when analyzing who will follow up: 1) Stock price performance:$BILIBILI-W (09626.HK)$, JD, and$TME-SW (01698.HK)$Best performance in the past month; 2) Offshore liquidity: Tencent,$iQIYI (IQ.US)$, station B,$BIDU-SW (09888.HK)$Hemeituan has net debt in US dollars; 3) Shareholder returns and cash positions: Tencent's stock repurchases and dividends are expected to account for 140% or more of net cash position this year, followed by JD 42% and Weibo 35%; 4) Historical convertible bond issuance: iQiyi has issued four times in the past five years, Station B three times, and Pinduoduo twice.

Editor/Somer