The headquarters of Alibaba in Hangzhou. The Chinese e-commerce company is expected to price its mega initial public offering between $60 and $66 per American Depository Share.
Reuters/New York
Alibaba Group Holding seeks to raise more than $21bn in an IPO that will value the Chinese e-commerce giant at up to $163bn and rank as the largest-ever technology debut in the US.
Alibaba expects to price its initial public offering between $60 and $66 per American Depository Share, valuing the company at about $162.69bn at the top end of the range and raising a maximum of $21.1bn.
The company founded by former English schoolteacher Jack Ma will decide on its final price after a globe-spanning roadshow that will kick off in New York tomorrow, and is expected to stop in cities from Hong Kong to San Francisco.
If all goes well, Alibaba may ring the opening bell on the New York Stock Exchange in as little as two weeks.
Industry analysts had expected Alibaba to try for a valuation in excess of $200bn, ranking the Chinese company among the 20 largest publicly traded companies in the US. It may eventually price above the initial range, should it deem investor demand sufficient.
Many investors are eager to buy a piece of a Chinese company that handles more e-commerce than Amazon.com and eBay combined.
“This number may seem enormous, but when you look at the value compared with the company’s fundamentals, it’s not as rich as we might expect,” said Brian Hamilton, chairman of private company analysis firm Sageworks.
But some investors remain cautious about the potential conflicts of interest between Ma’s role as a steward of the company, and his investment interests elsewhere. The company has also attracted its share of controversy in the past, as when it hived off lucrative payments unit Alipay, triggering objections from major shareholders Yahoo and Softbank.
The company said in its latest prospectus that it has racked up almost $16mn in IPO-related legal fees, unusually high for an IPO and an indication of the effort that Alibaba and its advisers have undertaken to prepare a complicated prospectus.
“When an Internet company of our scale that originated from China enters the global scene, you should expect that it will encounter skepticism from different directions due to differences in cultural perspectives, values and even geopolitical positioning,” Ma said in a letter to investors reminiscent of the “founder’s letters” that accompanied the debuts of Facebook and Google.
“While it may be difficult for a public Alibaba to side-step controversy, we hope that controversies generate constructive debate and add fresh perspectives to the dialogue on globalization.”
Some investors say the company’s fundamentals outweigh the risk of investing in a company with an unfamiliar governance structure.
Alibaba accounts for about 80% of all online retail sales in China, where rising Internet usage and an expanding middle-class helped the company generate gross merchandise volume of $296bn in the 12 months ended June 30.
The Chinese e-commerce giant’s revenue accelerated in the April-to-June quarter on strong gains in its mobile business, providing investors with what may be the final glimpse of the company’s financials before its expected landmark market debut. Revenue in the June quarter increased 46% year-on-year to $2.54bn, a faster pace than the 38.7% growth in the previous quarter.
Alibaba is selling 123.1mn of the 320.1mn ADSs slated for the IPO. Shareholders including Yahoo, Ma and executive vice chairman Joe Tsai are offering the remainder. CitiGroup has been appointed to the depositary receipt role for Alibaba, which means it will hold the underlying shares and issue ADRs to shareholders.
In other key banking roles, Morgan Stanley and Credit Suisse will manage the so-called “lockup” agreement that dictates when pre-IPO shareholders will be able to sell once the stock starts trading, a person familiar with the matter told Reuters.
Largest IPOs in stock market history
By raising as much as $24.3bn, Alibaba could break the record for the largest initial public offering in history.
Based on the price range announced Friday, which could be adjusted before the market debut, Alibaba would raise between $19.2bn and $24.3bn.
Here are the largest IPOs to date, according to the research firm Dealogic:
AgBank: The Agricultural Bank of China raised $22.117bn in its 2010 IPO in Hong Kong and Shanghai.
ICBC: Another Chinese financial group, Industrial and Commercial Bank of China, held its 2006 IPO in Hong Kong and China, raising $21.929bn.
AIA Group: The Asian unit of US insurance group AIG raised $20.494bn in its 2010 Hong Kong IPO.
Visa Inc: The US payment and credit card issuer raised $19.650bn in a 2008 IPO in New York.
NTT DoCoMo: The Japanese mobile carrier, raised $18.379bn in Tokyo in 1998.
General Motors: The US auto giant, after emerging from bankruptcy, took in $18.140bn in 2010 in an IPO in New York and Toronto.
Enel: The Italian energy group raised $17.4bn in a 1999 IPO in Milan and New York.
Facebook: The US social network in 2012 raised $16bn.
NTT: Japan’s former state-owned telecom group raised $13.6bn in 1986 in Tokyo.
Deutsche Telekom: Germany’s big telecom carrier, in an IPO in Frankfurt, New York and Tokyo, raised $13bn.
