Alibaba receives enough support for IPO within two days of roadshows
10 Sep 2014
Alibaba Group Holding Ltd had received enough orders for its record-breaking initial public offering to cover the entire deal within just two days of the launch of its pre-IPO roadshow, Reuters reported.
According to the people who could not be named as the details of the offering demand were not yet public, there was no indication as to where most of that demand was in the $60-$66 per share indicative range for the IPO.
At the top end of expectations the IPO would raise $21.1 billion, outpacing Facebook Inc's $16 billion listing in 2012 as the largest-ever technology IPO.
The IPO could also set a new record for the world's biggest IPO if underwriters were to sell additional shares to meet demand taking it to $24.3 billion, topping Agricultural Bank of China Ltd's $22.1 billion listing in 2010.
The company launched its IPO roadshow on Monday and was expected to price the deal on 18 September.
According to the people, Alibaba had exercised strict control over the IPO, resulting in a vacuum at the helm of the group of banks managing the offering, which had led to a complicated arrangement with some bankers complaining it had created additional layers of work.
Meanwhile, Bob Bowsher writes in Money Week that despite all the hype Alibaba did have a couple of downsides, which investors needed to consider.
He writes that the big issue was governance and Alibaba already had a rotten reputation in this area. In 2010, it sold its payments business, Alipay, to Alibaba's founder, Jack Ma, for far too low a sum and after a big controversy, though Alibaba did backtrack on this, but was still a worry that Alibaba and Ma might try a similar trick in future.
Also shareholders would not be able to exercise much control over the board, which would really be run by 'partners' in the business.
Further, there were also concerns about what non-Chinese Alibaba shareholders would actually own, as Alibaba was seen as a 'strategic asset' in China, and overseas shareholders could not directly own shares. Instead they bought a stake in a 'variable interest entity' that would receive some of the profits that Alibaba would make, but there were no guarantees that Chinese courts would uphold the rights of the variable interest entities.