The company that claims to be “the largest online and mobile commerce company in the world” may be about to claim the record for the highest-value initial stock offering in history.
Alibaba Group Holding Ltd., which has been pitching its shares to investors for the past week in advance of a planned initial public offering on the New York Stock Exchange, today raised its projection of the initial price of its shares. The company, which generates the vast majority of its revenue from its operations in China, now says it expects its shares will be offered initially at between $66 and $68, up from its previous estimate of $60 to $66, according to a filing today with the U.S. Securities and Exchange Commission.
Alibaba has said it expects 368 million of its shares will be sold in the IPO. At $66 per share that would net the company and its shareholders $24.3 billion; at $68 the take would be just over $25 billion.
Even at the lower price, the IPO would exceed the record for world’s largest IPO, the $22.1 billion raised by Agricultural Bank of China in 2010. It would easily surpass the largest U.S. technology stock market debut in which Facebook Inc. raised $16 billion in 2012.
The increased offering price was predicted in various media accounts, which quoted sources as saying big investors were signing up in large numbers to buy Alibaba’s stock during the company’s presentations around the U.S., which began last week. Alibaba has not commented, as it is in a mandated quiet period ahead of its IPO.
Alibaba makes most of its money from its two big online marketplaces in China, Taobao and Tmall, where more than 8 million mostly small Chinese companies sold in the company’s most recent fiscal year to 279 million consumers. The total value of goods sold on the Alibaba marketplaces in the three-month period ended June 30 exceeded that of Amazon.com Inc. and eBay Inc. combined, by Internet Retailer estimates.
The company is also highly profitable, booking more than $2 billion in net income for its most recent fiscal quarter, although about half of that profit came from an upward revaluation of certain assets. Alibaba is more like eBay than Amazon in that it does not own merchandise itself, instead acting as a selling platform for other merchants. And, as eBay owns PayPal, Alibaba created a similar online payment service called Alipay, which is now operated by a separate subsidiary that is not included in the current IPO.
If the IPO goes as planned, Alibaba will have plenty of money to invest. The company plans to sell 123 million shares, which would bring in over $8 billion at the $66 per-share price. Alibaba has not offered details on how it will spend its money, but says in its SEC filings that it does not plan to repatriate the proceeds of the IPO to China. Alibaba, which operates out of corporate headquarters in Hangzhou, China, and Hong Kong, is legally registered in the Cayman Islands.
Upon landing today in Hong Kong to meet investors there, Alibaba founder and executive chairman Jack Ma offered a brief glimpse of what he has in mind: “After our IPO in the United States we will vigorously expand in Europe and the United States. Meanwhile, we will not give up on Asia.”
Alibaba already has made several investments in the United States. Alibaba participated last year in a $170 million funding round for e-retailer Fanatics Inc., No. 42 in the 2014 Internet Retailer Top 500, and in June launched an online marketplace called 11Main.com that features the wares of independent shopkeepers in the U.S. It’s also invested in mobile game developer Kabam and the mobile ride-sharing app Lyft. To coordinate its investments in U.S. technology firms, the Chinese company last fall opened an office in Silicon Valley.
Including shares to be sold by shareholders, Alibaba says 368 million shares will be offered in the IPO. Besides the 123 million to be sold by the company, the next-largest block will be offered by Yahoo Inc., a long-time investor in Alibaba, which plans to sell 121.7 million of its shares, which should bring in at least $8 billion. That would Yahoo’s stake in Alibaba from 22.4% to 16.3%.
The largest shareholder in Alibaba is Japanese technology conglomerate Softbank, which owns 34.1% of the company, and is not selling any of its shares in the IPO.
The IPO will confirm Ma, who founded Alibaba in 1999 in his Hangzhou apartment with 17 friends, as one of the world’s richest men. He plans to sell 12.75 million, a stake likely to bring in around $850 million. After the IPO, he will still own 7.8% of Alibaba, a position likely to be worth about $13 billion.
Alibaba shares are likely to start trading within a week. The company will trade under the symbol BABA.
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