Alibaba launches this year’s largest IPO

Chinese e-retail giant Alibaba has priced its highly anticipated Hong Kong IPO, which could net it in excess of $11 billion.

Elaine Kurtenbach had the news for the AP:

The Chinese e-commerce giant Alibaba has raised at least $11 billion in a share offering in Hong Kong, netting the city’s biggest offering since 2010 despite recent political turmoil.

Alibaba said Wednesday that it has set the price for the offering at 176 Hong Kong dollars ($22.50) per share. The price is a 2.9% discount for the closing price for its shares traded in New York. It’s also below the original maximum offer price of $188 Hong Kong dollars.

The company’s shares are due to begin trading on Nov. 26.

The secondary listing in Hong Kong is a rare boost for Hong Kong at a time when the former British colony is embroiled in political unrest.

The company’s share code, 9988, is a homonym in Chinese for “eternal prosperity.”

The company already has a significant cash pile of more than $30 billion, but analysts said it was riding the momentum from recent strong earnings, including the $38.4 billion in “Singles Day” sales on Nov. 11, up 26% from a year earlier.

Alibaba and rival JD.com reported combined sales of $70 billion during the annual marketing event that has become the world’s busiest online shopping day.

“The advantage for Alibaba is twofold. It can diversity its shareholder base during the U.S.-China trade war and it can command a high price, in part because investors in Hong Kong are clamoring for something positive amidst the protests,” Jasper Lawler of London Capital Group said in a commentary.

CNN’s Sherisse Pham reported:

“Secondary listings are an art form, not an exact science,” said Jeffrey Halley, senior market analyst for Asia Pacific at Oanda.

Alibaba wants to make sure its Hong Kong listing generates a lot of interest, so “they’re pricing at a level where I’m 100% sure those shares are going to be a lot higher on the day,” he added.

Alibaba stopped taking orders from retail investors half a day earlier than planned, after seeing stronger-than-expected demand for the secondary listing.

The enthusiasm is a vote of confidence in the Asian financial hub, which has been rocked by months of civil unrest. The Hang Seng Index (HSI) fell 4.8% last week as the city grappled with escalating levels of violence. So far this week, the index has gained around 2.2% despite a further escalation in violence centered around the siege of a university.

The company founded by billionaire entrepreneur Jack Ma raised $25 billion in an initial public offering on the New York Stock Exchange that shattered records as the largest IPO in history.

In the secondary listing, eight Hong Kong shares will be equal to one of Alibaba’s New York-listed shares, the company said in a US regulatory filing last week.

Scott Murdoch and Julie Zhu wrote for Reuters:

The deal will be seen as a boost to Hong Kong following more than five months of anti-government protests and its recent slide into its first recession in a decade.

Alibaba said in a statement it had priced the shares at HK$176 ($22.49) each, a discount of 2.9% to its New York closing price, confirming information earlier reported by Reuters.

The price means Alibaba will raise at least HK$88 billion ($11.3 billion) – a symbolic total because the number 8 is associated with prosperity and good fortune in Chinese culture.

Alibaba has also chosen the stock code 9988 for its listing, which for Chinese speakers combines two of the luckiest numbers, together symbolizing long-lasting prosperity.

The total raised from the deal could eventually reach $12.9 billion if a so-called ‘greenshoe’ over-allotment option were exercised.

Alibaba shares closed in New York on Tuesday at $185.25. One of Alibaba’s New York-listed American Depositary Shares (ADS) is worth eight of its Hong Kong shares.

While the discount to Alibaba’s last close was set at 2.9%, analysts noted the price represented a 3.7% discount to the Alibaba’s share price on Nov. 12 – the day before the deal was launched.

“I was expecting it to be done at around 4%-5% so this is about right,” said Sumeet Singh, head of research at Aequitas and who publishes on research website SmartKarma.

“The deal represents just about 4.4 days of three-month average daily value traded and hence, relatively it’s not a big deal for a stock of Alibaba’s size.”