If you’re an investment bank underwriter or trader looking for some ‘mojo,’ Christmas has come early this year.
After much anticipation, the Alibaba IPO is almost here. The Chinese online behemoth is looking to raise around $24 billion given a price range of $60 to $66 share, according to the Wall Street Journal. Alibaba said it will unload over 320 million American depositary shares, giving the company a possible valuation around $150 billion, making it in theory the largest IPO ever. Yahoo owns a 22.6% stake in Alibaba.
Danielle Hughes of Divine Capital says that while the demand is there, she’s a little cautious about jumping on the bandwagon. “I am very interested in this IPO, it’s the largest global IPO ever, and the two right behind, interesting enough, are two Chinese banks,” she notes in the attached video. “The big deal about Alibaba is it’s this huge retailer – it’s like combining Amazon (AMZN), Ebay (EBAY), and a whole bunch of other things all under one belt, and it really is all under one belt, that’s the real interesting thing about this structure.”
And that’s the thorny issue for Hughes – chairman and CEO Jack Ma’s control of the company. Ma, China’s richest man valued at over $22 billion, is very much intertwined with the business given the company's unorthodox corporate structure. Alibaba filed to go public in May, selecting a U.S. based listing after Hong Kong regulators rejected its proposed governance structure. Alibaba is structured as a partnership of 27 insiders, which including co-founders Ma and and vice chairman Joe Tsai, who will have the ability nominate a majority of the board.
“He controls the whole thing, which is very much unlike corporate governance in the United States,” she says. “If you buy Alibaba, you actually buy a holding company based in the Cayman Islands that has certain rights to the Chinese company, Alibaba, that is controlled by Jack Ma. You’re taking quite a big risk on the fact that there’s nothing really tying you as a shareholder to the assets and the entity itself.”
Structural issues aside, Alibaba will be biggest IPO of the year because demand for shares is simply there. “In terms of demand it’s tremendous,” she says, given investor appetite to capture a piece of the growing online pie in China. “[Alibaba’s] revenues last year to date were supposed to be $8.5 billion with a net of $3.76 billion - you’re talking about a giant, giant company.”
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