Alibaba eyes US$21b from US IPO
Print Edition
ALIBABA Group Holding Ltd seeks to raise more than US$21 billion in an IPO that will value the Chinese e-commerce giant at up to US$163 billion and rank as the largest-ever technology debut in the United States.
Alibaba expects to price its initial public offering between US$60 and US$66 per American Depository Share, valuing the company at US$162.69 billion at the top end of the range and raising a maximum of US$21.1 billion.
The company founded by former English schoolteacher Jack Ma will decide on its final price after a globe-spanning road show 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 might 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 US$200 billion, ranking it among the 20 largest publicly traded companies in the US. It might eventually price above the initial range, should it deem investor demand sufficient.
Many investors are eager to buy a piece of a company whose sales exceed those of Amazon and eBay combined. “This number might seem enormous, but when you look at the value compared with the company’s fundamentals, it’s not as rich as you 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, like when it hived off lucrative unit Alipay, triggering objections from major shareholders Yahoo and Softbank.
The company said in its latest prospectus that it has racked up almost US$16 million 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 might be difficult for a public Alibaba to sidestep controversy, we hope that controversies generate constructive debate and add fresh perspectives to the dialogue on globalization,” it said.
Some investors said Alibaba’s fundamentals outweigh the risk of investing in a firm with an unfamiliar governance structure.
The company handles about 80 percent of all online retail sales in China, where rising Internet use and a growing middle class helped it generate gross merchandise volume of US$296 billion in the 12 months ended June 30.
Its revenue accelerated in the April-to-June quarter on strong gains in its mobile business, providing investors with what might be the final glimpse of its financials before its market debut.
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