Chinese e-commerce giant Alibaba Group Holding Ltd is expected to sell about $22 billion in shares on Thursday putting an end to speculations and sky-high interest from investors all over the world. The company will finally carry out its Initial Public Offering, which may become the largest one on record.
According to what the company said in a statement earlier this week, its shares are to be priced after the markets close on Thursday. Alibabas shares will start trading on Friday on the New York Stock Exchange under the abbreviation BABA.
Alibaba will be offering 320 million shares, 123 million of which will be fresh issued, while the remaining 197 million will be sold by current shareholders. According to analysts, Alibaba could sell up to 368 million shares and raise $25 billion in case it prices shares at the high end of its proposed range of $66 go $68 and underwriters exercise an option to sell additional shares. This would float as much as 14.9% of Alibaba through American depositary shares and would beat Agricultural Bank of China Ltds record $22.1-billion listing four years ago.
Some analysts, however, also say that the new shareholders of the company may get an unpleasant surprise in case the stock of Alibaba performs similar to most of the largest Initial Public Offering in the U.S. As reported by Bloomberg, four of the five biggest companies listed in the U.S. declined by more than 17% over the year after they went public.
Currently, the largest shareholder of Alibaba is Japan-based SoftBank, which holds a 34% stake in the Chinese e-commerce group. The Japanese company revealed that it does not intend to dispose of any of its shares in Alibaba, but after the Initial Public Offering, its stake will be reduced to 32.4%.
Another one of the biggest investors, Yahoo, which controls 22.4% of Alibaba, said that it intends to sell a 4.9% stake, which totals 121.7 million shares. The founder of Alibaba – Jack Ma, who holds an 8.8% stake in the company, plans to offer 12.7 million shares, or 0.5%. Alibabas Executive Vice Chairman Mr. Joseph Tsai is to dispose of a 0.2% stake, which equals to 4.3 million shares.
“Investors clamor for shares when given access to a large private company for the first time,” Walter Todd, chief investment officer at Greenwood Capital Associates, said for Bloomberg. “Companies run the risk of setting themselves up for failure in the short term by getting overhyped. Based on history, that’s definitely a risk for Alibaba.”
The only exception is Visa Inc., whose stock increased by 28% after its 2007 Initial Public Offering that helped the company raise a total of $19.7 billion. Alibaba, which is considered to carry out the largest Initial Public Offering in the history of the U.S., explained that it hopes to raise as much as $21.8 billion.
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