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 At that price, the IPO, one of the largest-ever, would give
Alibaba a market valuation of $167.6 billion, surpassing American
corporate icons from Walt Disney Co <DIS.N> to Boeing Co <BA.N>. The
offering also vaults it atop U.S. e-commerce rivals like Amazon
<AMZN.O> and eBay <EBAY.O> and gives it more financial firepower to
expand in the United States and other markets.
“I’d put them (Alibaba) in a class of Facebook and Google with the
scale they have, growth prospects and profitability," said Scot
Wingo, CEO of e-commerce software provider ChannelAdvisor. "There’s
a scarcity value there.”
An Ipsos poll conducted for Thomson Reuters found that 88 percent of
Americans had never heard of the Chinese e-commerce company, which
is responsible for 80 percent of online sales in the world's second
largest economy and works with a number of businesses there
including consumer online marketplace Taobao and payment service
Alipay.
But that didn't sap enthusiasm among multiple large U.S.
institutions, including Blackrock <BLK.N>, which put in orders for
allocations of at least $1 billion in shares, according to the
sources.
Between 35 and 40 institutions placed orders for $1 billion or more
shares each, investors briefed on the matter said.
Keen to buy into China's rapid growth and evolving Internet sector,
investors have been clamoring to get shares since top executives at
Alibaba, including Ma, kicked off the road show last week.
“It was one of the more impressive IPO presentations,” said Jerry
Jordan, manager of the $48 million Jordan Opportunity Fund
<JORDX.O>. “I didn’t realize just quite how successful they are."
Based on the amount raised so far, Alibaba's IPO is the
third-largest ever behind Agricultural Bank of China Ltd's
<601288.SS> record $22.1 billion listing in 2010 and ICBC's
<601398.SS> $22 billion flotation in 2006.
If underwriters exercise an option to sell more shares, as many
expect, Alibaba's will surpass both Chinese lenders to become the
largest-ever. Alibaba and certain other shareholders also granted
underwriters a separate 30-day option to buy up to an additional 48
million shares.
Many investors reported difficulty in getting the full allocation of
shares they were aiming for.
John Boland, president of Maple Capital Management in Montpelier,
Vermont said he had put in orders for about 5,000 Alibaba shares on
behalf of high net worth individuals and institutions and had been
told the offer was oversubscribed and that they would probably not
get the full order.
“Beating the rush doesn’t count in this game,” Boland said.
Alibaba's revenue surged 46 percent in the April to June quarter on
strong gains in its mobile business, with net income attributable to
its shareholders nearly tripling to $1.99 billion, or 84 cents a
share.
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Ma, who founded the company in a one-bedroom apartment, will have a
paper fortune worth some $14 billion, vaulting him into the ranks of
tech billionaires like Bill Gates and Jeff Bezos. The deal is also
expected to make millionaires out of a substantial chunk of the
company's managers, software engineers and other staff.
In addition, it allows cornerstone Alibaba investors like Japan's
Softbank <9984.T> and Yahoo <YHOO.O> to profit from their foresight
in getting in on the ground floor at the e-commerce giant. Yahoo is
selling some $8 billion worth of shares in the offering, leaving it
with a 16.3 percent stake. Softbank is not selling for now and will
be left with a 32 percent stake, making it the largest single
shareholder.
The successful IPO sets the stage for Alibaba shares to make their
debut on the New York Stock Exchange on Friday, with many investors
and analysts betting that there is still room for a substantial
first-day jump in the shares.
One investor said that the IPO's underwriters, who include Credit
Suisse Group AG <CSGN.VX>, Citigroup Inc <C.N> and Goldman Sachs
Group Inc <GS.N>, were hoping for a first day "pop" of 10 to 15
percent. That's about in line with the norm for IPO debuts, whose
underwriters typically seek an increase large enough to signal
healthy demand but not so much so that it looks like the company and
its investors "left money on the table."
Other big Chinese Internet stocks have performed well in U.S.
markets, including Baidu Inc <BIDU.O>, whose shares rocketed 354
percent on their first trading day in 2005.
Underwriters on the Alibaba deal also include Morgan Stanley <MS.N>
and JPMorgan Chase & Co <JPM.N>, with Rothschild, which does not
have underwriting operations, advising Alibaba on the deal.
Still, concerns that an opaque corporate governance structure and
Ma's outside investments will stymie minority investors' rights
could limit the upside around the deal.
“Rarely in history has there been an IPO of this size for a company
that we know less about,” Senator Bob Casey, Democrat of
Pennsylvania, said in a statement on Wednesday. “I continue to be
concerned that about the level of transparency from Chinese firms
listing in our markets."
Alibaba is selling 320 million shares, equivalent to about 13
percent of the company's capital. Nearly two thirds of those shares
are being sold by existing shareholders including Ma, who will reap
$867 million.
(Additional reporting by Ross Kerber)
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