Investors Oversubscribe to Alibaba’s Share Offer BUSINESS ASIA By Bloomberg
By John Liu and Bei Hu
Alibaba.com raised $1.5 billion in the second-biggest Internet initial stock sale after Google as investors sought more than 180 times the number of shares on offer, said two people with direct knowledge of the matter.
The Hangzhou-based operator of the largest trading Web site for companies in China and parent Alibaba.com Corp. sold 858.9 million shares, or a 17 percent stake, at 13.50 Hong Kong dollars, or $1.74, each in Hong Kong, said the people, declining to be identified before an official statement. The sale values Alibaba at about $8.8 billion.
The share sale, the biggest by a Chinese Internet company, may lure other mainland Chinese Web businesses to sell shares in Hong Kong, where the benchmark Hang Seng index has jumped 57 percent this year. The demand for the Alibaba stock underscores investors’ appetite for shares in the world’s second-largest Web market.
“Alibaba is certainly among the most interesting issues to come to market in a long time, given the firm’s unique market position, exceptional growth opportunities, and high barriers to competitive entry,” said Jim Oberweis, president of Oberweis Asset Management in Illinois.
Hong Kong individuals ordered about 453 billion dollars, or $58.4 billion, of stock, 266 times the amount available to them, the people said. That beat the 446 billion dollars of retail orders Belle International, the largest women’s shoe retailer in China, drew for its initial public offering in the Hong Kong in May.
Alibaba.com, which has forecast 2007 profit may almost triple, is scheduled to start trading in Hong Kong on Nov. 6. Deutsche Bank, Goldman Sachs Group, and Morgan Stanley arranged the sale.
Christina Splinder, a Hong Kong-based spokeswoman for Alibaba, declined to comment. So did spokespeople for the three investment banks.
Alibaba’s share sale is the biggest initial public offering by a Web company after Google’s $1.9 billion share sale in August 2004, according to data compiled by Bloomberg. Google, the owner of the world’s most popular search engine, sold shares at $85 apiece and closed at $674.60 on Oct. 26.
International institutions sought about $160 billion of shares, the people said, more than 190 times the amount still available to them after the retail portion was expanded and about $300 million worth of shares reserved for eight corporate investors including Yahoo! and Cisco Systems.
The final share sale price values the company at almost 54 times 2008 earnings before stock-based compensation for its employees, as estimated by the investment banks involved in the sale. The multiple rises to 66 times after such expenses are deducted, people said earlier.
“The question remains if the post-IPO price will offer room for future upside or will already reflect Alibaba’s favorable prospects,” Oberweis said.
Baidu.com, operator of the most-used search Web site in China, surged almost fivefold on its first day of trading in August 2005 on the Nasdaq Stock Market. Tencent Holding, the biggest provider of online chat services in China, also rose in its first trading in June 2004 in Hong Kong.
Originally published by Bloomberg News.
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