Alibaba Raises $1.5 Billion in Share Sale, People Say
Oct. 29 (Bloomberg) -- Alibaba.com Ltd. raised $1.5 billion in the second-biggest initial public offering sale of an Internet company after Google Inc., said two people with direct knowledge of the matter.
Investors sought more than 180 times the number of shares on offer, the people said. Alibaba.com, the operator of China's largest trading Web site for companies, and its parent sold 858.9 million shares, a 17 percent stake, at HK$13.50 apiece in Hong Kong, the people said. That values Alibaba at about $8.8 billion.
The sale by Hangzhou-based Alibaba, the biggest by a Chinese Internet company, underscores the potential for growth in China. The country may overtake the U.S. as the biggest Web market by users next year, analysts said. The IPO also may lure other local Web businesses to sell stock in Hong Kong, where the Hang Seng Index has jumped 57 percent this year.
``Alibaba is certainly among the most interesting issues to come to market in a long time, given the firm's unique market position, exceptional growth opportunities, and high barriers to competitive entry,'' said Jim Oberweis, who helps oversee $3 billion as president of Oberweis Asset Management Inc. in Lisle, Illinois. Oberweis ordered Alibaba shares.
Hong Kong individuals ordered about HK$453 billion ($58.4 billion) of stock, 266 times the amount available to them, the people said. That beat the HK$446 billion of retail orders Belle International Holdings Ltd., the nation's largest women's shoe retailer, drew for its IPO in the city in May.
Profit May Triple
Alibaba.com Ltd., which has forecast 2007 profit may almost triple, is scheduled to start trading in Hong Kong on Nov. 6. Deutsche Bank AG, Goldman Sachs Group Inc., and Morgan Stanley arranged the sale.
Christina Splinder, a Hong Kong-based spokeswoman for Alibaba, declined to comment. So did spokespeople for the three investment banks.
Alibaba's offering is the biggest IPO by a Web company after Google's $1.9 billion share sale in August 2004, according to data compiled by Bloomberg. Google, the owner of the world's most popular search engine, sold shares at $85 apiece and closed at $674.60 on Oct. 26.
International institutions sought about $160 billion of shares, the people said, more than 190 times the amount still available to them after the retail portion was expanded and about $300 million worth of shares reserved for eight corporate investors including Yahoo! Inc. and Cisco Systems Inc. Yahoo owns a 39 percent stake in parent Alibaba.com Corp.
Future Upside?
The final IPO price values the company at almost 54 times 2008 earnings before stock-based compensation for its employees, as estimated by the investment banks involved in the sale. The multiple rises to 66 times after such expenses are deducted, people said earlier.
``The question remains if the post-IPO price will offer room for future upside or will already reflect Alibaba's favorable prospects,'' said Oberweis.
Baidu.com Inc., operator of China's most-used search Web site, surged almost fivefold on its first day of trading in August 2005 on the Nasdaq Stock Market. Tencent Holding Ltd., China's biggest provider of online chat services, also rose in its first day in June 2004 in Hong Kong.
China was home to 162 million Internet users at the end of June, second only to the U.S., after adding 25 million Internet users in the first half of the year, according to the government- backed China Network Information Center.
Web Site Trading
The Asian nation may surpass the U.S. as the world's largest Web market by users next year, said Liu Bin, an Internet analyst at Beijing-based research company BDA China Ltd.
Companies can post products for sale or purchase from Alibaba's Web site for free. It charges suppliers from China and Hong Kong an annual fee of as much as 60,000 yuan ($8,027) to become so-called premium members. A similar service is offered to suppliers from other regions for an annual fee of $589.
Chairman Jack Ma, 43, founded Alibaba in his apartment nine years ago with $60,000. Softbank Corp., Japan's third-biggest mobile-phone carrier, bought a stake in the company in 2000 and now owns 29.3 percent of parent Alibaba.com Corp.
Alibaba.com Ltd. said in its share sale document that profit this year will be at least 622 million yuan, up from 219.9 million yuan in 2006
