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Alibaba weighs up its share price as world's biggest IPO looms Alibaba weighs up its share price as world's biggest IPO looms
(about 7 hours later)
The Chinese online giant Alibaba will set the price of its shares on Thursday in what is expected to be the world's biggest-ever initial public offering (IPO).The Chinese online giant Alibaba will set the price of its shares on Thursday in what is expected to be the world's biggest-ever initial public offering (IPO).
Anticipation is building among investors in advance of the eagerly awaited IPO, which is expected to raise up to $22bn (£13.5bn).Anticipation is building among investors in advance of the eagerly awaited IPO, which is expected to raise up to $22bn (£13.5bn).
Shares in the company, which has been described as a combination of Amazon and eBay for China, will be priced after the close of the New York Stock Exchange and will start trading there on Friday.Shares in the company, which has been described as a combination of Amazon and eBay for China, will be priced after the close of the New York Stock Exchange and will start trading there on Friday.
The sale of shares in Alibaba Group Holding Ltd, which will be listed under the ticker BABA, follows a two-week global roadshow which has resulted in frenzied interest from investors eager to buy into the rapid growth of China's internet sector.The sale of shares in Alibaba Group Holding Ltd, which will be listed under the ticker BABA, follows a two-week global roadshow which has resulted in frenzied interest from investors eager to buy into the rapid growth of China's internet sector.
The founder and executive chairman of the company, Jack Ma, disappointed British investors when he failed to show up at a briefing in London on Wednesday, instead leaving the explanation of Alibaba's structure and revenue streams to more junior staff.The founder and executive chairman of the company, Jack Ma, disappointed British investors when he failed to show up at a briefing in London on Wednesday, instead leaving the explanation of Alibaba's structure and revenue streams to more junior staff.
Ma, 50, whose flamboyant style has seen him dress up as Lady Gaga in the past to entertain staff, started Alibaba 15 years ago in his one-bedroom flat and retains a 9% stake.Ma, 50, whose flamboyant style has seen him dress up as Lady Gaga in the past to entertain staff, started Alibaba 15 years ago in his one-bedroom flat and retains a 9% stake.
Since then, Alibaba has come to power 80% of all online commerce conducted in China, the world's second-largest economy. It has also branched out into areas such as e-payments and financial investment. The floatation is expected to confirm him as China's richest man.Since then, Alibaba has come to power 80% of all online commerce conducted in China, the world's second-largest economy. It has also branched out into areas such as e-payments and financial investment. The floatation is expected to confirm him as China's richest man.
The strong demand from investors prompted Alibaba to boost the IPO price range to between $66 and $68 a share.The strong demand from investors prompted Alibaba to boost the IPO price range to between $66 and $68 a share.
At the top end of that range, the IPO would raise almost $22bn, but if underwriters exercise an option to sell more shares, Alibaba's market debut will top Agricultural Bank of China Ltd's record $22.1bn listing in 2010.At the top end of that range, the IPO would raise almost $22bn, but if underwriters exercise an option to sell more shares, Alibaba's market debut will top Agricultural Bank of China Ltd's record $22.1bn listing in 2010.
"We believe that the current pricing range of $66-$68 significantly undervalues the long-term growth potential of the company," said CRT Capital analyst Neil Doshi."We believe that the current pricing range of $66-$68 significantly undervalues the long-term growth potential of the company," said CRT Capital analyst Neil Doshi.
The complex governance structure in the company and Ma's outside investments have raised questions about potential conflicts of interest and investors' ability to sway Alibaba's strategy.The complex governance structure in the company and Ma's outside investments have raised questions about potential conflicts of interest and investors' ability to sway Alibaba's strategy.
The company decided to list its shares in New York after Hong Kong stock exchange officials rejected its request to allow a small group of company insiders to nominate the majority of the board.The company decided to list its shares in New York after Hong Kong stock exchange officials rejected its request to allow a small group of company insiders to nominate the majority of the board.
The IPO caps a lengthy listing process in which Alibaba took the rare step of not appointing a single bank to take charge of the process. Instead, it tapped all its major bookrunners for advice, and divided tasks among them.The IPO caps a lengthy listing process in which Alibaba took the rare step of not appointing a single bank to take charge of the process. Instead, it tapped all its major bookrunners for advice, and divided tasks among them.
Alibaba plans to expand its business in the US and Europe, where it is not widely known, after the deal. A recent US poll found that 88% of respondents had not heard of the company.Alibaba plans to expand its business in the US and Europe, where it is not widely known, after the deal. A recent US poll found that 88% of respondents had not heard of the company.
The five biggest IPOs
Agricultural Bank of China: July 2010, raised $22.1bn valuing the Chinese bank at $133bn
Industrial and Commercial Bank of China: raised $21.9bn in 2006, valuing the company at $131.8bn
Bank of China: raised 11.2bn in 2006 valuing the company at $94.1bn
Facebook: raised $16bn in 2012, the biggest float outside China, valuing the company at $81bn
Electricite de France: raised $9bn in Paris in 2005, valuing the state-controlled power company at $72bn
Source: Dealogic