Despite its recent run-ins with authorities, Alibaba Group Holding Ltd. sold $5 billion in bonds, demonstrating that investors are still willing to back the Chinese e-commerce behemoth.
Alibaba said in a filing that it issued four sets of bonds with yields ranging from 2.143 percent to 3.251 percent. Alibaba sold $1.5 billion in 10-year and 30-year notes, as well as $1 billion in 20-year and 40-year bonds.
Where can you purchase bonds?
Purchasing new issue bonds entails purchasing bonds on the primary market, or the first time they are released, comparable to purchasing shares in a company’s initial public offering (IPO). The offering price is the price at which new issue bonds are purchased by investors.
How to Buy Corporate Bonds as New Issues
It can be difficult for ordinary investors to get new issue corporate bonds. A relationship with the bank or brokerage that manages the principal bond offering is usually required. When it comes to corporate bonds, you should be aware of the bond’s rating (investment-grade or non-investment-grade/junk bonds), maturity (short, medium, or long-term), interest rate (fixed or floating), and coupon (interest payment) structure (regularly or zero-coupon). To finalize your purchase, you’ll need a brokerage account with enough funds to cover the purchase amount as well as any commissions your broker may impose.
How to Buy Municipal Bonds as New Issues
Investing in municipal bonds as new issues necessitates participation in the issuer’s retail order period. You’ll need to open a brokerage account with the financial institution that backs the bond issue and submit a request detailing the quantity, coupon, and maturity date of the bonds you intend to buy. The bond prospectus, which is issued to prospective investors, lists the possible coupons and maturity dates.
How to Buy Government Bonds as New Issues
Government bonds, such as US Treasury bonds, can be purchased through a broker or directly through Treasury Direct. Treasury bonds are issued in $100 increments, as previously stated. Investors can purchase new-issue government bonds at auctions held several times a year, either competitively or non-competitively. When you place a non-competitive bid, you agree to the auction’s terms. You can provide your preferred discount rate, discount margin, or yield when submitting a competitive offer. You can keep track of upcoming auctions on the internet.
Is now a good time to invest in Alibaba?
Alibaba shares have had a great week since the price appears to be undervalued and investors are taking advantage of the large drop.
Shares of the Chinese tech giant have climbed more than 9% since the start of 2022, after losing nearly half of their value in 2021 due to increased regulatory pressures and concerns about slowing growth. This rise comes as U.S. tech peers have fallen in tandem with rising bond yields and signs of monetary policy tightening.
Is Alibaba a debtor?
The picture below, which you may click to enlarge, shows that Alibaba Group Holding had debt of CN151.8 billion in September 2021, up from CN121.8 billion a year earlier. However, it also has CN459.2 billion in cash, resulting in a net cash position of CN307.5 billion.
A Look At Alibaba Group Holding’s Liabilities
Alibaba Group Holding had obligations of CN387.9 billion due within a year, and liabilities of CN239.9 billion due after that, according to the most recent balance sheet data. On the other hand, it had CN459.2 billion in cash and CN56.9 billion in receivables due in the next year. As a result, its liabilities exceed its cash and short-term receivables by CN111.6 billion.
Of all, with a market valuation of CN1.99 trillion, Alibaba Group Holding’s liabilities are likely to be manageable.
However, we believe it is important to monitor its balance sheet strength because it may alter over time.
While Alibaba Group Holding does have obligations, it also has more cash than debt, so we’re convinced it can handle its debt responsibly.
Fortunately, Alibaba Group Holding’s EBIT increased by 8.7% in the previous year, making the debt load appear even more reasonable.
The balance sheet, without a question, teaches us the most about debt.
But, in the end, the business’s future profitability will determine whether Alibaba Group Holding can strengthen its balance sheet over time.
So, if you’re looking ahead, have a look at this free study that shows analyst profit estimates.
Finally, a business can only repay debt with cash, not accounting earnings. Despite the fact that Alibaba Group Holding has net cash on its balance sheet, it’s still worth looking at how well the company converts earnings before interest and taxes (EBIT) to free cash flow, as this will affect both its need for and capacity to manage debt. Over the last three years, Alibaba Group Holding has produced more free cash flow than EBIT, which is good news for shareholders. Like a puppy in a bumblebee suit, robust cash generation warms our hearts.
Summing up
While it is always prudent to consider a company’s total liabilities, Alibaba Group Holding’s net cash of CN307.5 billion is quite encouraging. The cherry on top was that 161 percent of the EBIT was converted to free cash flow, bringing in CN154b. Is the debt of Alibaba Group Holding a risk? That does not appear to be the case to us. The balance sheet, without a question, teaches us the most about debt. However, every organization can, in the end, manage risks that lie outside of the balance sheet. As a result, you should be aware of the two red flags we’ve discovered regarding Alibaba Group Holding.
When all is said and done, it’s sometimes easier to concentrate on businesses that don’t require financing. Right now, readers may get a list of growth stocks with zero net debt that are completely free.
Is Alibaba a solid 2021 investment?
The market has yet to value Alibaba’s e-Commerce business in the way it should be valued: based on its predicted growth potential. However, ignoring all of the talk about crackdowns and fines in 2021, Alibaba’s e-Commerce business is booming. Especially encouraging is the fact that during the pandemic, Alibaba has been expanding its logistics business, which combines perfectly with its local and international e-Commerce activities. Alibaba’s e-Commerce performance has been excellent throughout 2021, while revenue growth is expected to decelerate to 20-23 percent in FY 2022, according to Alibaba. However, the long-term picture for China’s e-Commerce sales is highly promising: retail e-Commerce sales are predicted to increase by 10% annually from $2.6 billion in 2021 to $3.8 billion in 2025. Because Alibaba’s home market accounted for over 77 percent of its sales in Q2’22, an investment in Alibaba is primarily a gamble on China’s continued retail e-Commerce development.
Is it possible to acquire Alibaba stock directly?
Alibaba is a multinational e-commerce platform established in China. It was launched in 1999 by billionaire Jack Ma with a concentration on China but plans to grow to other countries of Asia, Europe, North America, and South America.
With a $150 billion IPO, it has been one of the most successful firms in recent years, raising funds for their expansion initiatives.
Online auctions, marketplace commerce, third-party logistics, and customer support agents are among the services offered by the organization.
Alibaba has recently become an international giant, exceeding eBay’s 78 percent market share in China last year.
Alibaba has two classes of shares: A class and B class, which trade under the BABA (A) and BABA (B) tickers (B). Due to tight Chinese rules, shares are not immediately available for purchase on American stock exchanges; instead, you must purchase American Depository Receipts (ADRs).
Alibaba’s stock has recently outpaced the large cap S&P 500 index and is a well-known brand.
Furthermore, it gives you exposure to China without exposing you to the currency risks that come with investing in Chinese stocks directly.
Alibaba, with its 34 percent compounded yearly returns, should be considered as an alternate investment plan for long-term money growth.
It provides some diversification benefits while also having a long-term appreciation potential.
Due to its size and integration into global markets, China is one of the fastest growing economies in the world, accounting for more than 60% of global trade.
This indicates that if investors are seeking for worldwide growth prospects, they need act quickly before the market becomes saturated.
If you want to acquire Alibaba stock, you’ll need to find an internet broker who can help you buy it on the NASDAQ stock exchange.
However, this does not imply that the stock is a good investment. You’ll have to evaluate for yourself whether the company is a decent stock to invest in for your own scenario.
Is it possible to buy bonds directly?
- Because bonds differ from stocks, most investors should include a percentage of their portfolio in bonds as a diversifier.
- Bonds are debt-like fixed-income securities that make bondholders creditors.
- Many brokers now allow clients to buy individual bonds online, while it may be quicker to buy a bond-focused mutual fund or exchange-traded fund (ETF).
- Without the use of a broker, government bonds can be acquired directly via government-sponsored websites.
- Residents of certain municipalities may be able to earn tax-free income through municipal bonds.