 "Alibaba seeks $21.1 billion in record-breaking US public offering")
Alibaba Group Holding Ltd, the e-commerce company whose fortunes surged along with China's economy, plans a historic US initial public offering (IPO) that might also claim the global record.
Alibaba is seeking a valuation of as much as $162.7 billion, larger than 95 per cent of the Standard & Poor's 500 Index, as it enters the IPO's final stages. At the high end of the proposed price range, Alibaba would be the third-most valuable internet company traded in the US after Google Inc and Facebook Inc. The offering could raise as much as $21.1 billion, according to a regulatory filing on Friday.
Even at the high end, the valuation falls below more optimistic estimates of Alibaba's worth - analysts surveyed in July put its value at an average $187 billion. That would give China's largest e-commerce company room to raise the IPO price as it built demand during meetings with fund managers, said Henry Guo, an analyst at JG Capital.
Alibaba might temper its valuation, some analysts said in July, which could help it avoid the listing flop of Facebook. Those analysts forecast that Alibaba would value itself at about $154 billion, after applying a discount.
Facebook had a price tag of $104 billion at the time of its IPO in May 2012 and went on to lose half its market value as investors worried about slowing growth and the company's mobile strategy. The stock has since recovered.
Leadership, structure
While Alibaba's IPO is coming amid growth in China's e-commerce market, investors now must weigh the risks of buying shares in the Hangzhou-based company. The internet behemoth, whose marketplaces are comparable with those of EBay and Amazon.com, has a governance arrangement that keeps insiders in control, as well as an ownership structure that could face objections from the Chinese government.
Alibaba and selling stockholders - including Yahoo! Inc, which owns more than 22 per cent of the company, Chairman Jack Ma and Vice-Chairman Joe Tsai - plan to sell 320.1 million American depository shares for $60 to $66 apiece, the filing shows. Those shares are equivalent to a 13 per cent stake. The stock will be listed on the New York Stock Exchange under the symbol 'BABA'.
"We believe one thing, today is difficult, tomorrow is more difficult, but the day after tomorrow is beautiful," Ma said in the company's presentation. "So we have to work very hard in order to survive the long journey."
Tsai is selling 4.25 million shares, meaning he could make $280 million if the shares were priced at the top end. Ma will sell 12.75 million shares, earning as much as $841 million.
Visa, AgBank
Alibaba's sale could exceed Visa Inc's $19.7-billion IPO in 2008, the biggest US offering to date. Including an overallotment option, Alibaba could raise as much as $24.3 billion, surpassing the existing global record held by Agricultural Bank of China, which raised $22.1 billion in sales in both Hong Kong and Shanghai in 2010.
"This is their initial discussion of pricing, and then as the roadshow goes on and bankers build the books, they will have an idea about the interest level," said Eric Jackson, founder of Ironfire Capital LLC, in a phone interview from Toronto.
The roadshow would begin on Monday in New York, people with knowledge of the matter said. After that, executives would travel to Boston and Baltimore, before heading west to San Francisco, the people added. The executives will then meet with investors in London and Hong Kong. Alibaba is scheduled to price its IPO on September 18, according to data compiled by Bloomberg. The shares would start trading the next day.
Relative value
Compared with other internet companies, Alibaba is asking for a price that would make it expensive. At the high end of the IPO range, the company would debut at about 17 times its sales in the year through June, well over the multiple of 1.96 times at Amazon and 3.92 times at EBay. Chinese internet firms Tencent Holdings and Baidu trade at 13.53 times and 12.24 times, respectively.
The valuation itself would not stop investors who were drawn to Alibaba's potential, Jackson said. "In this environment, people want a growth story. People are willing to pay up for growth and Alibaba still has a lot of growth."
Alibaba provides various marketplaces for buyers and sellers as well as services that help them conduct their businesses. Taobao Marketplace, started in 2003, enables millions of individuals and small businesses to sell products. Tmall.com provides a virtual shopping mall, with retailers and brands offering products, and Juhuasuan operates a flash-sales model. The three sites accounted for 82 per cent of Alibaba's sales in the year through March.
FROM JACK MA'S APARTMENT TO NYSE
Nov 2007: Alibaba debuts on the Hong Kong Stock Exchange after raising about $1.7 billion; is valued at $25.7 billion at end of first day's trading
Sep 2011: Investors like DST Global, Temasek buy stakes in Alibaba, which is valued behind only Baidu and Tencent among China's internet firms
Jun 2012: Alibaba Group Holding takes Alibaba private, for about $2.4 billion
Sep 2012: Alibaba begins repurchase of shares from Yahoo!; buys back half of its stake
May 2014: Alibaba picks NYSE for an IPO; analysts surveyed by Bloomberg estimate value at $168 billion
Alibaba is seeking a valuation of as much as $162.7 billion, larger than 95 per cent of the Standard & Poor's 500 Index, as it enters the IPO's final stages. At the high end of the proposed price range, Alibaba would be the third-most valuable internet company traded in the US after Google Inc and Facebook Inc. The offering could raise as much as $21.1 billion, according to a regulatory filing on Friday.
Even at the high end, the valuation falls below more optimistic estimates of Alibaba's worth - analysts surveyed in July put its value at an average $187 billion. That would give China's largest e-commerce company room to raise the IPO price as it built demand during meetings with fund managers, said Henry Guo, an analyst at JG Capital.
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"This is below Wall Street's expectations," said Guo, who is based in San Francisco. "They prefer a smoother start so that they can push up the prices."
Alibaba might temper its valuation, some analysts said in July, which could help it avoid the listing flop of Facebook. Those analysts forecast that Alibaba would value itself at about $154 billion, after applying a discount.
Facebook had a price tag of $104 billion at the time of its IPO in May 2012 and went on to lose half its market value as investors worried about slowing growth and the company's mobile strategy. The stock has since recovered.
Leadership, structure
While Alibaba's IPO is coming amid growth in China's e-commerce market, investors now must weigh the risks of buying shares in the Hangzhou-based company. The internet behemoth, whose marketplaces are comparable with those of EBay and Amazon.com, has a governance arrangement that keeps insiders in control, as well as an ownership structure that could face objections from the Chinese government.
Alibaba and selling stockholders - including Yahoo! Inc, which owns more than 22 per cent of the company, Chairman Jack Ma and Vice-Chairman Joe Tsai - plan to sell 320.1 million American depository shares for $60 to $66 apiece, the filing shows. Those shares are equivalent to a 13 per cent stake. The stock will be listed on the New York Stock Exchange under the symbol 'BABA'.
"We believe one thing, today is difficult, tomorrow is more difficult, but the day after tomorrow is beautiful," Ma said in the company's presentation. "So we have to work very hard in order to survive the long journey."
Tsai is selling 4.25 million shares, meaning he could make $280 million if the shares were priced at the top end. Ma will sell 12.75 million shares, earning as much as $841 million.
Visa, AgBank
Alibaba's sale could exceed Visa Inc's $19.7-billion IPO in 2008, the biggest US offering to date. Including an overallotment option, Alibaba could raise as much as $24.3 billion, surpassing the existing global record held by Agricultural Bank of China, which raised $22.1 billion in sales in both Hong Kong and Shanghai in 2010.
"This is their initial discussion of pricing, and then as the roadshow goes on and bankers build the books, they will have an idea about the interest level," said Eric Jackson, founder of Ironfire Capital LLC, in a phone interview from Toronto.
The roadshow would begin on Monday in New York, people with knowledge of the matter said. After that, executives would travel to Boston and Baltimore, before heading west to San Francisco, the people added. The executives will then meet with investors in London and Hong Kong. Alibaba is scheduled to price its IPO on September 18, according to data compiled by Bloomberg. The shares would start trading the next day.
Relative value
Compared with other internet companies, Alibaba is asking for a price that would make it expensive. At the high end of the IPO range, the company would debut at about 17 times its sales in the year through June, well over the multiple of 1.96 times at Amazon and 3.92 times at EBay. Chinese internet firms Tencent Holdings and Baidu trade at 13.53 times and 12.24 times, respectively.
The valuation itself would not stop investors who were drawn to Alibaba's potential, Jackson said. "In this environment, people want a growth story. People are willing to pay up for growth and Alibaba still has a lot of growth."
Alibaba provides various marketplaces for buyers and sellers as well as services that help them conduct their businesses. Taobao Marketplace, started in 2003, enables millions of individuals and small businesses to sell products. Tmall.com provides a virtual shopping mall, with retailers and brands offering products, and Juhuasuan operates a flash-sales model. The three sites accounted for 82 per cent of Alibaba's sales in the year through March.
FROM JACK MA'S APARTMENT TO NYSE
- Early 1999: Alibaba created with $60,000 from 80 investors, out of the apartment of Jack Ma (pictured)
- Jan 2000: Softbank invests $20 million to help Alibaba grow in Asia
- Dec 2001: Alibaba surpasses one million registered users
- May 2003: Taobao, Alibaba's first consumer-to-consumer online marketplace, is set up
- Aug 2005: Alibaba forms strategic partnership with Yahoo!, which invests $1 billion and swaps Yahoo! China in exchange for a 40% stake
- Nov 2005: Ma says Alibaba is planning an IPO in the US over the next three to five years
- Sep 2014: Alibaba announces it will seek to raise $21.1 billion in its IPO; says it plans to sell 320.1 million American depositary shares for $60 to $66 apiece