The final countdown has just begun for e-commerce giant Alibaba’s highly anticipated New York IPO, allowing us to see just how much the company might be worth, how much money it might raise and whether it might be the biggest US or even global IPO of all time. The final answer to all of those questions will remain a mystery until Alibaba actually prices the deal, but at least we can speculate now what the chances are of it meeting some of the lofty goals that market watchers have set for the company. I’ll start by giving my view that the deal should price relatively strongly, and make some conclusions from that later in this post.
Alibaba released all the new information in a filing to the US securities regulator just before the weekend, including a price range of $60-$66 for its new American Depositary Shares (ADSs). (English article; Chinese article) The company plans to sell 320 million ADSs in the offering, meaning it could raise anywhere from $19.2 billion to as much as $21.1 billion. The final size of the fund raising could go as high as $24.3 billion if all of the overallotment options are exercised.
To put that into perspective, Facebook (Nasdaq: FB) raised $16 billion in 2012 when it made the largest IPO to date by an Internet company. The biggest-ever IPO in the US came from credit card company Visa (NYSE: V), which raised $19.7 billion in its New York IPO in 2010. And the biggest global IPO of all time came from Agricultural Bank of China (HKEx: 1288; Shanghai: 601288), which raised a combined $22.1 billion through its dual listing in Hong Kong and Shanghai in 2010.
So we can say with near certainty that the Alibaba IPO will be the largest in history by an Internet company, and it’s almost certain to also be the biggest in US history unless it prices at the very bottom of its range. If the offering prices relatively strongly as I expect, the ultimate fund raising could hit the $22-$23 billion level, meaning there’s a reasonably good chance it would also be the biggest IPO of all time.
Next let’s look at overall valuations. According to the new filing, Alibaba’s price range could give it a final value of anywhere from $154 billion to $170 billion. That’s roughly in line with what most people have been saying up until now, though at a few points some bullish people were putting the figure at $200 billion or more.
In this case, the most important comparable figure is the market value for Tencent (HKEx: 700), currently China’s largest listed Internet company, which is valued at $154 billion. So unless Alibaba stumbles badly during its road show or Tencent rallies sharply in the next 2 weeks, Alibaba looks almost certain to emerge from the IPO as China’s most valuable Internet company and also one of its most valuable privately owned companies.
Let’s round out this summary with a separate set of reports from unnamed sources saying Alibaba will formally start its road show this week, and aims to make the final pricing for its shares in the late hours of September 18 or the early morning hours of September 19. (Chinese article) The stock would then make its formal trading debut when the markets open on September 19, which happens to be a Friday.
With all this new information in hand, it’s fairly safe to say the end is in sight of Alibaba’s drawn-out IPO process, which began last year with plans for a Hong Kong listing, only to shift to New York and see further delays due to its size and complexity. I’m quite excited to see the deal finally happening, but also will be happy when it’s finally finished. I do think the deal will price relatively strongly due to strong marketing. But it could then see a weak debut similar to that experienced by Facebook, as investors finally take a much-needed breather from all the nonstop hype about this hyperactive company.
Bottom line: Alibaba’s IPO is likely to be the biggest US offering of all time and should make it China’s most valuable Internet company, though its shares could debut weakly due to investor fatigue.