Alibaba IPO To Shatter Tech IPO Records

Alibaba is to float on the New York Stock Exchange (NYSE) on Friday morning, and is expected to raise a cool $21.8bn – or £13.3bn in real money.

In doing so, the Chinese e-commerce giant will set a very tough act to follow for any other tech firms looking to brave the stock market in the future.

Successful Floatation

When it finally filed its F1 papers in May for its long-awaited IPO, Alibaba said it expected to raise $1 billion (£589m). However investors thought that figure was much too conservative and predicted that the online retailer could raise as much as $15bn (£8.8bn) in its floatation.

Facebook in comparison raised $16bn (£9.4bn) in its IPO. Twitter raised just $1.82bn (£1.1bn).

But it is expected that Alibaba will do much better than just raising $15bn (£8.8bn). It will sell 121.7 million of its shares, priced at $68 (£41.52) apiece, the top end of its planned range on Friday. That share price gives Alibaba a market value of $167.6bn (£102bn), double that of eBay, ahead of Amazon.com (£92bn), but just behind that of Facebook (£122bn).

At the time of writing, the latest indications are that Alibaba’s stock will open in the $82 to $85 price range. Some have even predicted it will float at $100 per share, which will make it more valuable than Facebook.

That $167.6bn market valuation should make Alibaba one of the most valuable technology companies on the planet and amongst the top 25 most valuable companies in the United States, ahead of the likes of American corporate icons such as Walt Disney and Boeing.

A few companies have raised more previously. Visa raised $17.9bn (£10.9bn) in its 2008 offering. In 2010, the Agricultural Bank of China raised $22.1bn (£13.5bn) on the Hong Kong Stock Exchange. In 2006, ICBC (Industrial and Commercial Bank of China) raised $22bn (£13.4bn).

Yahoo Payout

The boss of the company is Jack Ma, who founded the company in a one-bedroom apartment. He is expected to have a paper fortune worth some $14bn (£8.56bn). The deal is also expected to make millionaires out of many of the company’s managers, software engineers and other staff.

In June, Alibaba warned its staff of the pitfalls of sudden wealth, but there are a couple of clear tech winners in the floatation.

Yahoo owns 23 percent of the company, even though Alibaba recently paid $7.1bn (£4.1bn) to buy back some of Yahoo’s stake. That should make Yahoo $5.1bn (£3.1bn) richer, as it plans to sell off some of its shares to leave it with a 16.3 percent stake.

Those returns present a challenge for CEO Chief Executive Marissa Mayer on what to do with the money as she seeks to restore growth at her company.

Alibaba’s largest single shareholder, with a 32 percent stake, is Japanese telecom firm SoftBank Corp, which will not be selling any of the shares.

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Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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