Alibaba Group Holding, the leading online retailer in the world, begins its stock-trading history today, with the launch of its Initial Public Offering on the New York Stock Exchange. Market officials expect the stock to become available to the public withing a few hours of opening, as the massive amount of orders need time to be processed.
The Chinese e-commerce giant had already allocated the 320 million shares at $68 each, raising $21.8bn ahead of public trading start. Many analysts expect underwriters to exercise options to sell more shares, adding 48 million shares to the table, making Alibabas IPO the largest ever.
“I’d put them (Alibaba) in a class of Facebook and Google with the scale they have, growth prospects and profitability,” Scot Wingo, CEO of e-commerce software provider ChannelAdvisor, said for Reuters ahead of Friday trading. “There’s a scarcity value there.”
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%.
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%. Alibaba’s Executive Vice Chairman Mr. Joseph Tsai is to dispose of a 0.2% stake, which equals to 4.3 million shares.
The buyers of stock are quite clustered, with at least 35-40 institutions placing orders for $1bn or more in shares each, investors said, resulting in many interested parties failing to achieve target investments. The frenzied demand will most probably also prompt underwriters to sell the optional 50 million shares.
Some analysts and officials, however, cautioned about the level of transparency at Alibaba.
“Rarely in history has there been an IPO of this size for a company that we know less about,” Senator Bob Casey, Democrat of Pennsylvania, said in a statement cited by Reuters. “I continue to be concerned that about the level of transparency from Chinese firms listing in our markets.”
Two analysts at the Financial Times, who offer 12-month price targets for Alibaba Group Holding Ltd, have a median target of $87.50, with a high estimate of $95.00 and a low estimate of $80.00. The median estimate represents a 28.68% increase from the initial price of $68.00.
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