NEW YORK: Chinese online retail giant Alibaba is poised for a record-breaking stock market debut on Friday, with shares priced at $68 in a public offering that could be valued at $25 billion.
The company will step into the spotlight on the New York Stock Exchange, priced at the top of the $66-$68 per share range announced earlier this week, according to documents filed with US regulators.
The amount raised by the initial public offering (IPO) would be $25.02 billion if options are exercised for additional demand, breaking the 2010 record of China’s AgBank of $22.1 billion.
Alibaba founder Jack Ma was expected to ring the opening bell on Wall Street for the market debut, according to persons familiar with the IPO.
Alibaba would have a market value of around $168 billion based on the price, making it bigger than Amazon.
The IPO will also create instant Silicon Valley-style millionaires among Alibaba’s employees in China, as the company emulated other tech firms like Microsoft and Google in handing out stock to employees at all levels, the New York Times reported Friday.
Before the IPO, around 6,000 current and former employees of Alibaba and affiliates owned nearly $8 billion in stock, the Times said.
Over the years many more shares were given to employees who have already cashed out, the paper said.
“Can you imagine the sort of wealth that’s being generated through this?” Sanjay Varma, a former Alibaba vice president who still owns shares in the company, told the Times, “It’s incredible.”
The IPO allows investors to get a piece of the huge Chinese market, but it also will fuel Alibaba’s international ambitions.
Alibaba’s consumer services are similar to a mix of those offered by US Internet titans eBay, PayPal and Amazon, and it also operates services for wholesalers.
It is known for the giant Chinese online marketplace Taobao, among other services.
The company earlier this year announced plans for a US marketplace called 11 Main, which is currently in a test phase.
Alibaba Group made a profit of nearly $2 billion on revenue of $2.5 billion in the quarter ending June 30. Revenue rose 46 percent from the same period a year earlier.
Alibaba decided to list in New York because it wanted an alternative class share structure to give selected minority shareholders extra control over the board; the Hong Kong bourse declined to change its rules to allow this.
The Chinese firm will trade under the symbol “BABA”.
A US government panel has warned of risks to investors because of a complex corporate structure—Alibaba is registered in the Cayman Islands and controlled by a partnership through a series of shell companies.
Harvard law professor and governance specialist Lucian Bebchuk meanwhile warned that the structure, which allows inside minority shareholder control at Alibaba, is worrisome.
“With an absolute lock on control and a limited fraction of the equity capital, the Alibaba insiders will have substantial incentives to divert value from Alibaba to other entities,” Bebchuk said in a New York Times blog this week.
The IPO is also a major event for US-based Yahoo, which bought a 40 percent stake in the Chinese online giant in 2005 for $1 billion and still holds 22.4 percent. The California company is expected to walk away with some $10 billion paring that stake down to 16.3 percent.
Huge war chest
Alibaba’s record-setting stock offering will give the Chinese online group a huge war chest that can help its global expansion.
Yet it remains to be seen whether the IPO will propel Alibaba into being a challenger for the dominant technology firms like Amazon, Google and eBay, analysts say.
Warwick Business School professor Qing Wang, who researches Chinese enterprises, said the IPO could be a watershed moment.
“Alibaba’s IPO could well be the end of US dominance in the world technology sector,” Wang said.
“Alibaba’s annual growth rate of more than 30 percent shows that the gap between the Chinese companies, Alibaba and Tencent, and US companies is getting ever closer.”
Some analysts were more sceptical.
“Despite its dominance in China, Alibaba won’t be sweeping away US market share in the near future,” a Forrester Research report said this week.
“Rather, it will take a major acquisition or a number of years for Alibaba to pull together a platform that could compete with major players like Amazon, Apple, eBay, and Facebook.”