Alibaba Group Holding Ltd (NYSE:BABA)’s Jack Ma was called a genius by some analysts and there is some tacit knowledge beneath their statements. Besides the fact that the company is doing a great job in spurring the development of the economic ecosystem in China, it also manages to please investors with impressive growth. According to Bloomberg, treasury yields have risen by 23 basis points (0.23%) for the 2 year maturity and 29 basis points (0.29%) for the 5 years, which is a sign that rates will go up and so will the cost of borrowing. Alibaba Group Holding Ltd (NYSE:BABA)’s taking advantage of this sweet spot to issue $8 billion worth of bonds as Bloomberg further points out.
“In this case that’s what some analysts are pointing at. They’re taking advantage of the low interest rates right now. Because we all know the outlook is really on higher rates ahead, at least for the Federal Reserve. So, they want to lock those borrowing costs,” informed David Ingles.
Alibaba Group Holding Ltd (NYSE:BABA) has no particular need for the liquidity, that is the company’s standing proud on its feet exhibiting strong financial health, however, why not cash in on these appealing numbers, especially since the economy seems to be getting better. Moreover, the bonds to be issued by the e-commerce colossus are very low risk considering that both s&p and Moody have an A rating on the company.
“At this point you look at the yields on investment rate e-commerce companies, of which Alibaba Group Holding Ltd (NYSE:BABA) is of course part of. You look at the recent transactions of Amazon.com, Inc. (NASDAQ:AMZN), eBay Inc (NASDAQ:EBAY) for example. We’re looking at borrowing costs here up to 2.7%, so fairly low,” stated David Ingles.
Alibaba Group Holding Ltd (NYSE:BABA) dived a bit yesterday down to a price of $114.84, which would be some 2.84%, but it’s looking a bit better in pre-market with a price of $115.55 and almost 1% to the upside.
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