The Chinese e-commerce company Alibaba Group is about to go public and there is a lot demand, which has prompted the company to increase the price of its shares when it goes public.
It is boosting the price of shares from a $60-$66 range to a $66-$68 range, which (if it sells for the latter price range) would make it one of the largest IPOs in history.
With these new figures Alibaba could raise up to 21.8 billion in capital (just below the global record of $22.1 billion in 2010 by the Agricultural Bank of China), valuing the company at around the $165.5 billion mark.
Alibaba decided to increase the range because they wanted to give investors a better sense of where they will actually price the IPO.
It is unlikely that the company will price its shares above $68 and given the announcement it is likely that shares will be priced between $66 to $68. Although it is not impossible that they will sell for more.
Purchase orders have been placed in an enormous quantity, with one hedge fund placing an order for several billion dollars’ worth of American depositary shares, according to the New York Times.
Jack Ma, the Executive Chairman of Alibaba, has the most say in the strategy of the IPO. Most analysts believe that his strategy is going to be a success and that the share prices could actually be considered quite cheap in retrospect.
Alibaba states that it will be using the money for opportunity in China, however, in recent years there’s been a number of investments by the company outside of China.
In fact, Jack Ma recently remarked that he plans for the company to one day compete in the European and American market, setting in mind a somewhat global ambition, which highlights Jack Ma’s expressed (yet not clear) intentions to expand internationally.
If so, then the big question will be when and how is Alibaba going to enter new markets.
The company initially focused on global trade, however, it then focused inside China (for a reason).
Yahoo is a big seller in this IPO (as it has a 22% stake in the company) and it is selling $8 billion worth of stock (an exit opportunity for Yahoo), which will help them to capitalize off of Alibaba’s IPO.
However, according to Gil Luria, a Webush Securities analyst, the company’s stake in Alibaba is one of its only large remaining assets, which could be bad for the company in the future.