Alibaba IPO – FAQs

Here's a look at the basics of the historic Alibaba IPO

   


The buzz is that Alibaba, the Chinese ecommerce powerhouse, will pull off its IPO on August 8th. The reason: the number “8” symbolizes good fortune.

Regardless of the Alibaba IPO date – which is far from certain – the fact is that the deal will be massive. It could even be the biggest one in history. Consider that various analysts think the Alibaba IPO will raise a haul in excess of $20 billion.

If anything, the timing may be pretty good. JD.com (JD), which is China’s No. 2 ecommerce operator, recently launched a successful IPO, up about 40%. At the same time, the US markets are getting back on track. Just look at various successful tech IPOs like Arista Networks (ANET) and Zendesk (ZEN).

So to help out, we at InvestorPlace.com put together a FAQ on the Alibaba IPO.

Q: How much will a share of Alibaba stock cost?

A: There is no way to know what the Alibaba stock price will be. In fact, management probably does not have an exact price in mind right now.

Part of this reason is that the price also depends on how many shares are sold. An IPO of 20 million shares at $10 per share will be worth just as much as an IPO of 10 million shares at $20 per share.

And because the markets are generally volatile, companies typically will wait to set a price range just a couple weeks before the IPO. This provides some flexibility as well as enough time to get a sense of demand. To this end, a company will hold roadshow, which involves making several presentations to investors.

One potential hint (if you’re searching) of a possible IPO price came in September 2012, when Alibaba repurchased shares from Yahoo! (YHOO) at $13.54 each.

Of course, since then, Alibaba has grown at a rapid clip and it seems reasonable that the stock price could easily be twice as valuable.

Q: What is the Alibaba stock symbol?

A: Alibaba has not yet proposed a stock symbol, and that likely won’t happen until the company selects a exchange to list on.

The New York Stock Exchange is the current favorite to land the Alibaba IPO, though the Nasdaq is fighting hard to win the deal. According to Fox Business Network’s Charlie Gasparino, Alibaba is likely not to make a decision until later this month.

However, there are rumors that the Alibaba stock symbol will be “BABA” — a nod to superstition concerning the number eight.

Q: Who are the Alibaba IPO underwriters?

A: The lead underwriters for the Alibaba IPO are Citigroup (C), Credit Suisse (CS), Deutsche Bank (DB), Goldman Sachs (GS), JPMorgan (JPM) and Morgan Stanley (MS).

Q: Who gets to buy Alibaba’s initial offering?

A: Institutions such as mutual funds and hedge funds typically are the only parties that can buy into IPOs before going public. They have a lot of buying clout, plus they tend to do business with the underwriters and other involved groups.

But if you’re just Joe Schmo and wondering how to buy Alibaba stock before the IPO, don’t be discouraged. In the cases of some mega-offerings, underwriters have no choice but to seek out retail investors. Such was the case with Facebook (FB). In other words, there’s a chance you could buy Alibaba before the IPO.

Q: Where can I buy the Alibaba IPO if I live in the U.S.?

A: You will need to have an account with one of the underwriters or a firm that is part of the syndicate. Otherwise, if you’re looking for how to get in on the Alibaba IPO, you will have to wait until after the shares come public.

Q: Can I buy the Alibaba IPO in Canada?

A: Alibaba stock will not be listed in Canada, thus, you can not buy the Alibaba IPO on a Canadian exchange. However, a Canadian citizen can use his or her own brokerage account to buy the Alibaba IPO in the U.S. market.

Q: Can I buy shares in Alibaba in Hong Kong?

A: Fun fact: Alibaba was once listed on the Hong Kong Stock Exchange but went private in 2012. Anyway, if a citizen of Hong Kong or China wants to buy the upcoming Alibaba IPO, then he or she will need to buy U.S.-listed shares.

Q: Can you buy the Alibaba IPO in a mutual fund?

A: No mutual funds currently have any shares of Alibaba. However, a number of mutual funds will buy Alibaba stock sometime after the offering. Look for mutual funds that are centered around technology, Internet and/or Chinese stocks.

Q: How much of Alibaba does Yahoo own?

A: Yahoo (YHOO) owns 22.6% of Alibaba.

Q: Who else owns Alibaba?

A: The breakdown of the major Alibaba owners:

  • SoftBank (SFTBF): 34.4%
  • Yahoo: 22.6%
  • Jack Yun Ma, Executive Chairman: 8.9%
  • Joseph Tsai, Executive Vice-chairman: 3.6%

Alibaba’s S-1 does not give much in the way of detail about smaller owners.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/alibaba-ipo-faq/.

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