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 Alibaba expects to price its initial public offering between $60 and
$66 per American Depository Share, valuing the company at about
$162.69 billion at the top end of the range and raising a maximum of
$21.1 billion.
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 on Monday, 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 $200 billion, ranking the Chinese company among the 20
largest publicly traded companies in the United States. 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 Inc 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.
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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 $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 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 percent of all online retail sales in
China, where rising Internet usage and an expanding middle-class
helped the company generate gross merchandise volume of $296 billion
in the 12 months ended June 30.
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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 percent year-on-year to
$2.54 billion, a faster pace than the 38.7 percent growth in the
previous quarter.
Alibaba is selling 123.1 million of the 320.1 million 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, according to a source familiar with the
matter.
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. Goldman Sachs will act
as the "stabilization agent," overseeing the stock's early trading.
Credit Suisse will also oversee the "friends and family program,"
formally known as a directed share program, the person familiar with
the matter said.
“Listen, it’s a very successful company. The market needs a company
like this," said Akram Yosri at 3i Capital Group. "As an
institutional, I would have liked to see around $135 billion. It’s
up to the syndicate now, I hope they exercise prudence.”
(Additional reporting by Jessica Toonkel in New York; Writing by
Edwin Chan; Editing by Savio D'Souza and Ken Wills)
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