Alibaba’s wayward media unit is raising another $1.6 billion

Alibaba Pictures Group Ltd, the film and entertainment unit of China’s largest e-commerce company, said Thursday it plans to raise $1.6 billion in a share offering to select investors to finance media-related acquisitions.

The deal comes after a rally that nearly doubled the shares of the company, majority owned by Alibaba Group Holding Ltd (BABA), over the past year. That rally came despite an accounting scandal that led to it replacing its auditors.

The unit’s problems have exposed Alibaba to accusation of irresponsible binge-buying as it recycles revenue from its core e-commerce business. However, the group sees it as essential to expand into media content to drive its continued growth.

Alibaba Pictures plans to sell 4.2 billion shares at HK$2.90 each, putting the total deal at HK$12.18 billion ($1.57 billion), according to a Hong Kong stock exchange filing. The price represents a discount of 13% from Monday’s close and the stock tumbled as much as 11% after trading resumed in Hong Kong on Thursday. It had been halted on Tuesday pending an announcement.

Alibaba Pictures, previously known as ChinaVision Media Group, is flush with cash after raising nearly 5 billion yuan ($807 million) in 2014 from a massive share offering that put Alibaba in control of the company. The company has only used 123 million yuan from the proceeds, most of it on films and television series.

In January, one of China’s biggest movie stars, Zhao Wei, and her director husband, Huang Youlong, had paid over $375 million for a stake of 9.2% in the company, despite a sharp drop in revenue last year that it blamed on delays in TV-series distribution, the cancellation or delay of slated films, and a drop in magazine advertising revenue.

Alibaba Pictures said it had not yet identified any acquisition targets.

Credit Suisse and Morgan Stanley were hired as placing agents for the offering and stand to earn HK$63 million from managing the deal, according to the filing.