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Alibaba’s IPO makes history
In the dog-eat-dog world of investment banking, a widely-used practice to indicate the ranking of arrangers in an initial public offering is to list them starting with the bank that has a bigger role. This gives it the prestigious title of “lead-left bank” -- unless the banks are arranged alphabetically, thus keeping the rankings politically correct.
Gita Dhungana 1 Oct 2014

Amid an unprecedented hype and demand, Alibaba Group made history, completing the world’s largest and most successful initial public offering ever. The Chinese internet giant priced the offering at US$68 per share, or the top end of the revised price range of US$66-US$68 per share on the back of heightened investor demand. The final pricing guidance was raised from the earlier US$60-US$66 per share after the deal garnered frenzied interest during its two-week global roadshow.

A strong order book meant the company was able to avoid the fate of Facebook’s US$16 billion offering two years ago, which saw tech IPO market freeze for over a month after the stock’s poor aftermarket trading. The Alibaba stock surged as much as 38% to US$99.70 on its first day, before paring gains to close at $93.89.

Some 271 million shares changed hands, or more than double the turnover on Twitter Inc’s first day trading in 2013.

Alibaba, together with selling shareholders Yahoo, founder and executive chairman Jack Ma and executive vice-chairman Joe Tsai, offered 320 million shares in the IPO, with an additional 48 million shares in greenshoe. The greenshoe was exercised in full, increasing the deal size to US$25 billion and easily eclipsing Agricultural Bank of China’s US$22.1 billion offering in 2010, to become the largest IPO in history. Pre-greenshoe, the size of the offering stood at US$21.8 billion.

The strong debut trading propelled the company market value to over US$231 billion, more than Facebook or Amazon and eBay combined. The offering represents about 14% of the company’s enlarged share capital.

“Alibaba’s IPO could well be the end of US dominance in the world technology sector,” says Warwick Business School professor Qing Wang. “The company’s annual growth rate of more than 30% shows that the gap between the Chinese [internet] companies [such as] Alibaba and Tencent, and US companies, is getting ever closer.”

With the listing, Alibaba and Tencent are ranked among the top four internet companies in the US with Google at the top and Amazon also in the group.

“It’s no surprise to see Alibaba’s shares priced at the top of the range, given the heightened anticipation and demand for a mega-IPO of this size - especially one that is a Chinese company which has benefitted from the huge growth of the e-commerce market,” comments Mark Chan, corporate finance partner at law firm Berwin Leighton Paisner. “Investors have clearly not been discouraged by its complex corporate structure, which is not uncommon for companies like Alibaba that operates in “restricted” industries where foreign ownership is prohibited. Nor have they been put off by Alibaba’s various acquisitions, some of which have been called into question.

Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan and Morgan Stanley and Citi were joint bookrunners of the Alibaba deal.

 

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