Xpeng said Alibaba's move was in execution of its capital management strategy and not due to a change in its view of the company.
Shares of Chinese electric vehicle (EV) maker Xpeng (NYSE: XPEV) tumbled overnight after e-commerce giant Alibaba unveiled plans to reduce its stake in the company.
Alibaba's Taobao China plans to sell 25 million shares of Xpeng's American Depositary Shares (ADSs), worth a total of about $391 million, according to a US Securities and Exchange Commission filing yesterday.
Each ADS represents two shares of Xpeng ordinary shares, and Alibaba acquired those shares in a Pre-IPO investment, according to the filing.
Xpeng fell 7.54 percent to $14.47 by Friday's US stock market close, dropping its total market capitalization to $13.6 billion.
Local media outlet Sina Tech cited an Alibaba source overnight as saying the move was based on the company's capital management goals to sell part of its Xpeng stake, which was reduced from 10.2 percent to 7.5 percent.
"Xpeng is one of the leaders in China's electric vehicle sector, with which we have established a strategic partnership. We believe in Xpeng's prospects and look forward to continued cooperation with the company," the source said.
Alibaba's management mentioned in its third-quarter earnings call on November 16 that the company would optimize its capital management to improve return on capital and enhance shareholder value.
In its response today, Xpeng also emphasized that Alibaba's move was in execution of its investment liquidity strategy mentioned in its third-quarter earnings communication, and not due to a change in its view of Xpeng.
Following the reduction, Alibaba will remain Xpeng's second-largest shareholder, with a stake of about 8 percent, and will continue its deep strategic cooperation with Xpeng in areas including cloud computing, the EV maker said, according to local media outlet Cailian.
Xpeng also said it has established a strategic partnership with Volkswagen this year, with the German carmaker now its third-largest shareholder.
Xpeng currently has more than RMB 40 billion in cash on hand and billions of RMB in positive free cash flow in the second half of the year, and is cash-rich and its cash flow has improved significantly, it said.
Founded in 2014, Xpeng listed on August 27, 2020 in New York and on July 7, 2021 in Hong Kong.
Xpeng's prospectus for the Hong Kong listing showed that its chairman and CEO He Xiaopeng and his affiliates held 21.75 percent of the shares, while Taobao China's stake was 11.9 percent at the time.
On December 6, Xpeng said it completed the issuance of 94,079,300 class A ordinary shares to Volkswagen Finance Luxemburg S.A., an affiliate of Volkswagen, representing about 4.99 percent of the total issued and outstanding share capital after closing.
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