Chinese e-commerce juggernaut Alibaba is going to make its market debut, more likely in August (more likely August 8) this year, with appearing on the list of the New York Stock Exchange by the ticker symbol BABA.
But the fate of the Chinese Internet behemoth’s endeavor would largely depend on how easily it is accepted by the US buyers, who have not yet invested in Chinese stocks clamoring for shares.
Alibaba is expected to raise more than USD 20 billion, which would make it one of the largest offerings ever. It hopes to the best IPO ever in China.
What survey says?
Industry insiders believe the biggest challenge before the firm is to attract the non-traditional buyers for Alibaba’s underwriters and key to any short-term or long-term pop in its price.
A survey, conducted by the ConvergEx Group, of more than 300 institutional investors raises doubt over whether these buyers can be convinced.
According to the survey, widespread optimism prevails about the fate of Alibaba’s business model. Moreover, its potential performance as a publicly-traded stock is also trustable. But whether this optimism translates into plans to buy into the company is doubtful.
According to the survey, 43 percent of the participants have plans to buy shares of the company. And 64 percent of them find Alibaba as a good long-term investment. Moreover. 88 percent of the participants expect the stock to appreciate in the first month of trading.
Market insiders say fund managers, who have not yet invested in Chinese stocks, are likely to be the worst buyer of Alibaba. The survey shows only 38 percent of those fund managers said they would buy Alibaba’s stock in comparison to the 60 percent who have already purchased shares of Chinese companies.
Alibaba IPO: What’s your best bet?
The best option is to invest in Alibaba’s biggest shareholders including Softbank which own 37% of its shares or Yahoo which has 24% shares.
Both the companies have witnessed a significant appreciation of their shares in the past year. While Yahoo is up 76% , Softbank is 114%.
If you want to go with the USD 130 billion valuation, Yahoo’s stake is almost 80% of its current market cap, i.e. worth USD 31 billion. In 2012, Alibaba had repurchased half of Yahoo’s shares for USD 7.1 billion.
But looking back, that sale looks like a very poor decision.
“Forgive me for using hindsight here, but clearly I wish we hadn’t done that,” said Yahoo CFO Kenneth Goldman.
As far as Softbank’s current market cap is considered, it’s USD 99 billion. Its investment in Alibaba could be worth as much as USD 83 billion.
Masayoshi Son, Softbank’s founder and CEO, paid just USD 20 million for its investment back in 2000. This shows it has done much better than Yahoo.
From an investment point of view, Softbank may be the better long-term solution.
New entries into Alibaba’s board of directors
Alibaba Group Holding Ltd may get two more directors to its board once it goes public, a US regulatory filing said on Friday.
It already has a group of 27 top executives and investors including co-founder Jack Ma.
With this development, the board of Chinese e-commerce company will increase to 11 members from the existing nine. This move will also give Ma’s group control over the majority of Alibaba’s board after its market foray on the New York Stock Exchange later this year.
The company is mulling over designating four of its nine directors prior to its IPO. With the new move, the company will have the power to name six of the 11 board members.
“This governance structure and contractual arrangement will limit your ability to influence corporate matters, including any matters determined at the board level,” Alibaba wrote.