Alibaba Group Holding Ltd (阿里巴巴) priced its initial public offering at US$68 a share, the top end of the expected range, raising US$21.8 billion on Thursday, in the latest sign of strong investor appetite for the Chinese e-commerce juggernaut.
At that price, the IPO, one of the largest ever, would give Alibaba a market valuation of US$167.6 billion, surpassing US corporate icons from Walt Disney Co to Boeing Co.
The offering also vaults it atop US e-commerce rivals like Amazon.com Inc and eBay Inc, and gives it more financial firepower to expand in the US and other markets.
An Ipsos poll conducted for Thomson Reuters found that 88 percent of US citizens 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 (淘寶) and payment service Alipay (支付寶).
However, that did not affect the actions of numerous large US institutions, including Blackrock, which put in orders for allocations of at least US$1 billion in shares, according to sources.
Between 35 and 40 institutions placed orders for US$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 executive chairman Jack Ma (馬雲), launched the road show last week.
“It was one of the more impressive IPO presentations,” said Jerry Jordan, manager of the US$48 million Jordan Opportunity Fund. “I did not 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 (中國農業銀行) record US$22.1 billion listing in 2010 and Industrial and Commercial Bank of China Ltd’s (中國工商銀行) US$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 does not 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 shares nearly tripling to US$1.99 billion, or US$0.84 a share.
Ma, who founded the company in a one-bedroom apartment, will have a paper fortune worth some US$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 Corp and Yahoo Inc to profit from their foresight in getting in on the ground floor at the e-commerce giant.
Yahoo is selling US$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.
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,” Democratic Senator Bob Casey 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,” Casey added.
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