According to an article in the New York Times, Alibaba Group will announce that it has raised the price range for its initial public offering to $66 to $68 for each American depositary share. This increases the total value of the IPO share sale to around $21.8 billion. At the midpoint of the new range, that would give the e-commerce titan a valuation of $165.5 billion.
The NYT sources also mentioned that the new range will be disclosed in an amended prospectus that would be published in the net day or two, possibly as soon as Monday afternoon.
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Seeking to avoid a Facebook-like fiasco
Given the exceptionally strong demand for shares, the underwriters for Alibaba’s IPO will start closing their order books Tuesday afternoon. Moreover, the firm and its advisers were consciously aware that it was not a good idea to raise the price range just because they could, according to insider sources.
The sources noted that the Alibaba principals want to avoid what happened with Facebook‘s $16 billion stock market debut. The social networker bumped up its price range significantly because of strong investor demand. However, the higher price range left little potential upside to investors who did not participate in the offering, and together with technical issues impacting the trading of the stock, led to a dismal first-day performance for the firm’s shares. Facebook shares have recovered from the debacle, with the company now enjoying a market value of above $200 billion.
The Chinese Internet giant and its underwriters have taken that lesson to heart and decided to just bump up the price range to $66-$68 rather than all the way to $70 to avoid charges of greed. With the Alibaba share sale expected to raise a total of $21,8 billion, it looks like the title of largest IPO of all time that will remain with the Agricultural Bank of China, which raised $22.1 billion last year.
Windfall for buyers of Alibaba preferred shares in 2012
It turns out the IPO for Alibaba Group Holding later this week will be a windfall for a group of previously undisclosed investors who manged to buy preferred shares in the up and coming e-commerce company two years ago.
According to Wall Street Journal Sources, around two dozen institutional investors bought convertible preferred shares in Alibaba through a quiet $1.7 billion private offering back in 2012. The list of buyers included sovereign-wealth funds, Asian hedge funds, banks involved in the deal and other big asset managers.
Given the projected price for the shares of the IPO, those preferred shares sold two years ago will have more than tripled in value, a nice windfall for those well-connected investors.