Alibaba says Hong Kong's exchange has cleared it to spin off its chip unit T-Head in a separate listing

Alibaba Group said on Tuesday, November 10, that the Hong Kong Stock Exchange has confirmed it may go ahead with a spin-off and separate listing of T-Head, its semiconductor subsidiary, according to the company's exchange announcement. T-Head submitted a confidential listing application for the exchange's Main Board on September 11, the filing says.

What is T-Head?

The filing describes T-Head (Shanghai) Technology Co. as a provider of full-stack data center chips in China. It is wholly owned by Alibaba today and is expected to stay an Alibaba subsidiary after the deal. In late September, Alibaba announced a new AI chip, the Zhenwu V900, which it said delivers three times the performance of the model released in May, CNBC reported. Alibaba is one of several Chinese companies, including Huawei, building their own AI chips while the United States restricts China's access to advanced chips, CNBC said.

How would the listing work?

Alibaba proposes selling T-Head H shares through a public offering in Hong Kong and a placement with institutional and professional investors. The size and structure of the offering, and how much Alibaba's stake will shrink, have not been decided, the filing says. Alibaba's reasons include letting investors value the chip business on its own and giving T-Head direct access to equity and debt markets.

Existing Alibaba shareholders will not get a guaranteed allotment of T-Head shares. The exchange granted a waiver from that rule, partly because providing it would require T-Head to register an offering with the U.S. Securities and Exchange Commission, according to the filing.

What happens next

The plan needs approval from the exchange's Listing Committee, a completed filing with the China Securities Regulatory Commission and final decisions by both companies. Alibaba warned there is no assurance the spin-off will happen or when. Its Hong Kong shares traded about 1% lower on Wednesday morning and are down about 29% this year, CNBC said. CNBC also noted that China's financial regulators have stepped up scrutiny of technology listings.