The Alibaba IPO – How the Timing Works

A look at several key events in the timeline before the mega-offering hits the markets

   

alibaba group e1403868975565 The Alibaba IPO   How the Timing Works

Will Alibaba time their IPO during the typical Wall Street vacation season?

Over the past few months, Chinese Internet giant Alibaba has taken some key steps in the IPO process, such as the filing of the F-1, which includes details like the business description, financials, executive compensation and risk factors. Then there were two amendments to the F-1, which updated the financials as well as indicated the ticker (BABA) and exchange the company will list on (New York Stock Exchange).

Going forward, the Alibaba IPO process will involve some other key events. Here’s what to expect:

Alibaba IPO Pricing

Timing: Two to three weeks before the offering

Alibaba will provide the pricing information in an amended F-1. It will show the number of shares to be issued and the price range (Example: “We will issue 500 million shares at a range of $40 to $45″). As for the Alibaba IPO, there’s just no way yet to get a sense of what this will be. Still, several analysts have said Alibaba could raise more than $20 billion, which would make it the largest deal in history.

The F-1 also will show how much of the proceeds will go to the company and what will wind up in the pockets of insiders.

Alibaba IPO Date

Timing: A week before the offering

The buzz is that BABA stock will be launched on Aug. 8. Why? In short, it has to do with Chinese culture, in which “8” is pronounced “ba” and is similar to the concept of prosperity.

Interestingly enough, the IPO market typically grinds to a halt in August, when many Wall Streeters go on vacation. But given the expected size of the Alibaba IPO … well, they’ll probably stay in town.

You heard similar vacation grumbles around the Google (GOOG) IPO.

Alibaba IPO Roadshow

Timing: Two to three weeks ahead of the offering

The roadshow is when senior managers visit Wall Street firms to make investor presentations. With the Alibaba IPO, much of the activity will be in the U.S., but we’ll likely see a couple of presentations in Asia and Europe, too.

While they’re important, roadshows also can be grueling and monotonous — after all, would you like to give the same presentation dozens and dozens of times?

Still, if you’d like to check out the Alibaba IPO roadshow, you can get access to the first presentation at Retailroadshow.com.

Revised Alibaba Pricing

Timing: One week ahead of the IPO

Investment banks will gauge the demand for the offering during the Alibaba IPO roadshow. If demand is strong, the company will file an amended F-1 filing that will show an increase in the price range and a boost in the shares issued.

However, if demand is weak, that’s when you’ll start to see concerns about the offering.

“Free Writing Prospectus”

Timing: One week before the IPO

The “free writing prospectus” is a short filing that will show any material change in a company’s business. This is what Facebook (FB) did during its offering because it was having problems with the transition to mobile.

A free writing prospectus is rare, though, but when it does occur, it’s usually for negative reasons, and it can kill demand for a deal.

Finalization of the Alibaba IPO

Timing: 48 hours ahead of the offering

The company will send an “acceleration request” to the Securities and Exchange Commission, and the agency will almost always approve it. in technical terms, the IPO has become “effective.” At that point, an issuance of shares can happen any time.

But on the evening or night before the stock trades, the company and investment bankers will negotiate pricing details. As should be no surprise, this can be tense. A change of 50 cents can have a big impact on the amount raised. No doubt, this pressure will be magnified with the Alibaba IPO.

Once the pricing is determined, shares will be allocated to investors, and oftentimes, those investors won’t get all the shares they requested because the investment bankers are trying to create scarcity.

On the day of the IPO, the stock will began trading on the exchange. And typically you’ll see a pop in the stock price — because of that manufactured scarcity.

Lastly, the company will see a whirlwind of activity, usually involving a CEO ringing an exchange’s opening bell and doing various media interviews.

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.

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