E-commerce giant may lift top price for the long-anticipated public offering

Jack Ma, founder and executive chairman of Alibaba Group Holding Ltd, made an unscheduled appearance at the company's roadshow in Hong Kong on Monday, although there was little need to woo the big Hong Kong investors that have allocated huge sums to subscribe to the e-commerce company's initial public offering.

Bankers and fund managers crammed the ornate Diamond Hall of The Ritz-Carlton hotel to hear Ma tell them how he loved Hong Kong. Alibaba's original IPO plan was to list in Hong Kong, but the issue was rejected by the stock exchange over its corporate structure. Instead, the company turned to the New York Stock Exchange.

Attendees were eager for hints on whether the biggest-ever IPO in US history will offer a bargain for investors and what the company's growth strategy is.

A source with an underwriter said investors are pouring big money into the subscription, much of which originated from large investors on the Chinese mainland. Larger banks and brokerages set a minimum subscription bid at $8 million, while their smaller counterparts would take an offer for as low as $2 million.

"It is absolutely phenomenal. No one wants to be late," an equity research director with an overseas brokerage said on condition of anonymity.

Bloomberg News cited an anonymous source as saying on Monday afternoon that Alibaba plans to lift the top end of a marketed price range for the sale to above $70, which is $4 up from the former ceiling.

The company is marketing 320 million American depositary receipts, according to its filing with the US Securities and Exchange Commission.

"Alibaba's current business deserves the original pricing, in terms of valuation. I think it is better that they do not raise the price now as investors are buying growth. They could leave some room for price growth after the IPO," said Yi Huanhuan, deputy general manager and Internet analyst at Beijing-based Hongyuan Securities Co Ltd.

Under the original ceiling of $66 per share, Alibaba was to raise up to $24 billion. The stock price would be roughly 29 times analysts' estimates for current-year earnings. That is "conservative" compared with Chinese Internet peers Baidu Inc and Tencent Holdings Ltd, which trade at about 35 times earnings.

A similar valuation would imply a price of nearly $80 for Alibaba, according to Bloomberg.

Most market observers said they believe the price was set conservatively to protect the company from a controversial debut such as what Facebook Inc encountered in 2012, when its price sank after the IPO.

The IPO price is set by demand from investors, while the performance of the shares will be largely decided by the growth of Alibaba and whether it can tap demand around the world.

"Alibaba's rival Tencent jumped by 100 times from its IPO, and how Alibaba will perform is closely tied to the macro trends of consumption and the Internet industry in China," said Yi.

Ma said he has global ambitions. "We are an international company. We are an international company that happened to be in China," Ma told reporters before entering the roadshow hall, stressing the company is ready to expand into the US and European markets after its IPO.

Transactions in China have generated 85 percent of Alibaba's revenue so far this year, but the company has invested in six US startups in the past year as it seeks strategies to grow globally, according to research firm CB Insights.

Alibaba is expected to set the IPO price and start selling shares on Thursday. The following day, shares are to begin trading on the NYSE under the symbol BABA.

xieyu@chinadaily.com.cn

(China Daily USA 09/16/2014 page3)