Alibaba Group Holding Ltd. plans to boost the price of its initial public offering amid strong investor demand, people with knowledge of the matter said, potentially making it the biggest in history.
China’s biggest e-commerce company plans to increase the top end of a marketed price range to just below $70, from $66 previously, said one of the people, asking not to be identified discussing private information. The announcement is likely to come later today after the market closes in New York, according to the person.
Alibaba’s decision came even as billionaire founder Jack Ma told prospective investors today at Hong Kong’s Ritz-Carlton hotel he won’t seek too high a valuation, according to two people who attended the meeting. Ma said the company tried to fairly price the November 2007 sale of its business-to-business marketplace Alibaba.com Ltd., whose shares almost tripled on its Hong Kong debut, the people said.
“There was so much demand in the first two days, it’s reasonable to raise the price range slightly,” said Li Muzhi, a Hong Kong-based analyst at Arete Research Service LLP. “The company might want to not be too aggressive on pricing so it can still have some upside after the listing.”
The company is embarking on the second week of its global tour to meet with investors in Asia and Europe as it seeks to convince funds to buy into its offering. Alibaba had already received enough interest for its deal that it plans to stop taking orders for the sale early, people with knowledge of the matter said last week.
Alibaba and its advisers sifted through the orders over the last few days and determined that there was enough demand at the high end of the range that they could raise it, the people said today.Florence Shih, a Hong Kong-based spokeswoman for Alibaba, declined to comment.
Over a lunch today of smoked salmon, breaded chicken and mango pudding, Ma fielded investor questions on the company’s partnership structure, management philosophy and how it will maintain profit margins amid rising competition, people who attended the meeting said.
Ma is seeking to avoid a repeat of Alibaba.com, which plummeted below its IPO price shortly after listing. He ended up delisting the company in 2012 at its IPO price.
Alibaba aims to be a global company and plans to expand its business in Europe, the U.S. and Asia, Ma told reporters before the investor luncheon. Ma, a 50-year-old former school teacher, is China’s richest person with a net worth of $21.9 billion, according to the Bloomberg Billionaires Index.
The company is seeking to list after valuations for technology shares rose to a 4 1/2-year high, data compiled by Bloomberg show. The Nasdaq Composite Index climbed to the highest since March 2000 on Sept. 2, while the Standard & Poor’s 500 Index hit a fresh record three days later and a gauge of Chinese stocks in the U.S. traded near a three-year high.
At the original range, Alibaba’s market value was as high as $162.7 billion, which was conservative relative to peers. At the top end, the company was asking for about 29 times three analysts’ estimates for earnings in the year through March 2015, data compiled by Bloomberg show.
Chinese Internet peer Baidu Inc. trades at about 35 times estimates of this year’s earnings, while Tencent Holdings Ltd. trades at 37 times. A valuation of 35 times would imply a price of nearly $80 a share for Alibaba. Amazon.com Inc. fetches closer to 136 times forecast 2014 earnings.
Even at the previous $60 to $66 price range, Alibaba’s IPO could raise as much as $24.3 billion including an over-allotment option, surpassing Agricultural Bank of China Ltd.’s $22.1 billion sale in 2010 as the world’s biggest.
For U.S.-based investors, final orders will need to be in by 4 p.m. on Sept. 16, while Alibaba will stop taking orders in Asia and Europe during their respective afternoons on Sept. 17, people said last week. Alibaba still plans to set a final price for the shares on Sept. 18, with trading to begin the next day, one of the people said.
Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Citigroup Inc. are managing the offering. Rothschild is serving as an independent IPO adviser to Alibaba. The company plans to list its shares on the New York Stock Exchange under the symbol BABA.
By ZIJING WU, FOX HU & LULU YILUN CHEN September 15, 2014 in Bloomberg