Alibaba IPO price confirmed as $68/share

<p>UPDATE Late on Thursday, 18th September, Alibaba Group Holding’s final IPO price emerged. Shares will go on sale on Friday at $68 per share–the top […]</p>

UPDATE

Late on Thursday, 18th September, Alibaba Group Holding’s final IPO price emerged.

Shares will go on sale on Friday at $68 per share–the top of the range stated by the company.

This means Alibaba Group will not quite be the biggest dollar-denominated initial public offering, although it’s close.

Agricultural Bank of China Ltd. raised slightly more than $22bn at its IPO in 2010.

Alibaba Group will raise $21.8 billion.

In total the group will be valued around $168bn.


 

 

Alibaba: the IPO that keeps growing

Thursday, 18th September

Alibaba Group‘s initial public offering has all the hallmarks of another international stock market sensation like Facebook, Twitter and Google.

But as Friday, the IPO date, draws nearer, it’s looking like Alibaba’s debut could dwarf all three of those mega tech IPOs.

It’s because Alibaba’s market feast has turned out to be something of a moveable one:  the scale of the listing has increased in various ways in the last several weeks.

On Monday, the group said it planned to increase the price range of stock to be sold during the IPO because it had seen such strong investor demand during the ‘road show’ part of promotion for the listing. It’s during the road show that a company seeks to sell large stakes to major institutional investors.

The group had initially set the price range at which it would sell the stock at between $60-to-$66 per share, but it raised the range to between $66-to-$77 per share.

Even with the former per-share valuation, the total amount Alibaba could have raised might have been as much as $24.3bn, if a so-called ‘over-allotment’ option is taken into account.

The ‘over-allotment’ procedure allows an underwriting bank to issue more stock if it chooses to.

Now, estimates of the takings from share sale suggest the Chinese e-commerce giant is seeking to raise between $21.8bn and $25bn from investors, which would value the company at around $160bn in total.

As you can see, developments leading up to Friday’s IPO can seem to come thick and fast.

Below, we summarise some of the most important basic info you will need to know if you’re considering trading after Alibaba Group’s market debut.

Alibaba in simplified Chinese

 

Some basics about ‘BABA’

  • What is Alibaba Group Holding?

Good question.

Broadly speaking, Alibaba is China’s and, in many ways, the world’s biggest e-commerce company. The group includes online businesses Taobao, Tmall and Alibaba.com. Hundreds of millions of customers buy stuff from these outlets.

These online firms also host millions of other merchants and businesses.

But owning shares in Alibaba Group Holding will not be the same as owning stock in those businesses.

  • Who owns Alibaba?

(This section was updated to reflect holdings after the most recent stock sale to institutions before tomorrow’s public offering.)

So long as we’re referring to Alibaba Group Holding, we can work it out. There’s no way of knowing the ownership of many companies within the group, because that information is not public.

Alibaba.com founder, and CEO Jack Ma is by far the biggest individual shareholder of Alibaba Group Holding.

Ahead of Friday’s public share sale, Ma owns, 8.8% of the entire stock. He will be offering 12.7 million shares, or 0.5%  of the entire stock of Alibaba Group in tomorrow’s sale.

The largest institutional shareholder of Alibaba Group before the flotation is Japan-based telecom and Internet behemoth SoftBank Corp. It’s chairman and CEO Masayoshi Son is known to have had a business and apparently personal association with Jack Ma for several years. Softbank owns 34% of Alibaba. Softbank won’t be selling any shares. Its stake will be diluted to 32.4%.

Alibaba Group Holding’s executive chairman, Joe Tsai will be selling 4.3 million shares, equivalent to a 0.2% stake..

Yahoo Inc., is the second-largest institutional holder Yahoo, with 22.4% pre IPO, but it will reduce that to just 4.9% post IPO, if it sells the 121.7 million shares it plans to.

 

  • On what exchange will the stock be listed?

The New York Stock Exchange. Its ticker:  BABA

The NYSE listing of Alibaba Group is not to be confused with a prior listing of Alibaba.com.

Yes, there was one, in 2007.

But it didn’t go very well. The firm was a business-to-business e-commerce portal back then and was floated on Hong Kong’s stock exchange. A year later, the stock was down 55%. A number of poor earnings followed, then a trading scandal. The company was delisted in 2012. Shareholders were reimbursed their initial investment as the privatization matched the IPO price.

 

  • Where is Alibaba Group based?

Its official headquarters are in Hangzhou, the capital and largest city in Zhejiang province in Eastern China.

 

The Lock Up

Finally, let’s look at the single most important information investors need to know before an IPO, apart from the price, the so-called ‘lock-up’. This is the period of time during which institutional and founding investors are obliged to retain their entire holding in a stock, after it begins to be publicly traded.

This phase varies, and sometimes, early investors can be bound by differing lock-up conditions.

But investors are curious about how long the period will last for the same reason at every IPO. Obviously, that’s because sales of shares by founders and institutions can have a dramatic impact on the value of a stock’s trading price.

Alibaba Group’s documents make it clear almost all Alibaba’s existing shareholders will be locked up for at least six months after the initial public offering.

That does not include any stock early holders have already agreed to sell during the IPO itself. These cases would have been disclosed in the prospectus.

The biggest shareholders and top executives, including SoftBank Corp., Yahoo Inc., and Alibaba founder and CEO Jack Ma, and executive vice chairman, Joe Tsai—have a longer lock-up: one year, the prospectus said.

They’ll hold 58% of Alibaba Group after tomorrow’s share sale.

This post will be updated a number of times before Friday’s IPO goes live. We’ll add information and update you about further developments around the listing.

So please check back here soon.

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