Alibaba Group Holding Ltd. 's shares priced Thursday at
$68 apiece, putting the Chinese company on track for an initial public offering
that will raise at least $21.8 billion. The price was at the top of the
company's expected range of $66 to $68, which was increased from an initial $60
to $66. The price gives the e-commerce company an initial market value of $168
billion, making it one of the 40 biggest public companies globally, according
to S&P Capital IQ, and worth more than U.S. online- shopping giant Amazon.com Inc.
The deal sets the stage for the shares to begin trading
Friday on the New York Stock Exchange, under the ticker symbol BABA, an event
expected to be watched by investors world-wide.
Some analysts and investors have said the deal price gives
the stock room to rise on the open market, though its performance could depend
heavily on whether markets are volatile on Friday—possibly because of
uncertainty around the long-term effects of Scotland's independence vote—and
whether bankers correctly read the intentions of investors.
Another wild card: A group of early investors holding more
than $8 billion of Alibaba stock aren't subject to a so-called lockup, an
arrangement that typically restricts share sales immediately after an IPO.
Alibaba's founder and executive chairman, Jack Ma,
Alibaba's top managers and their bankers have pitched the company over the past
two weeks as an opportunity to invest in the growth of China's middle class, as
more Chinese buy goods and services via the Internet and mobile phones, and to
enjoy the profits generated by the company's "platform" model. The
company connects buyers and sellers without the cost of holding inventory on
its own.
With Mr. Ma joining presentations, the company fought back
against criticism from some academics and investors who see great risk in
Alibaba. Among the reasons for their concern is the fact that it operates in
part through a series of "variable interest entities" in China that
will be owned by senior executives, including Mr. Ma, rather than by Alibaba's
foreign shareholders.
Mr. Ma told investors that the move to separate key units
from Alibaba, such as online-payment network Alipay, was one of the toughest
decisions of his life, but necessary due to rules in China about foreign
control of some types of assets, people at the meetings said.
At the IPO price, Mr. Ma will own a stake in Alibaba worth
more than $13 billion. He also reaped $867 million in a sale of shares in the
offering. For the pricing, the company and its advisers adopted a strategy of
starting relatively low, then nudging the price higher. The aim was to build
support for the stock from the biggest institutional investment firms, who tend
to be most conservative on pricing because they have strict valuation models
they follow. Their interests differ from those of faster-money traders who try
to grab hot IPOs with fast-rising prices just to "flip" them for a
quick profit.
Click
here to access the full article on The Wall Street Journal.