Bankers in a stupor: who will get more money from the sale of Alibaba shares? The fact, that a Chinese company is registered in the Cayman Islands, and the listing will be carried out in the US markets.
For a long time, all the media have been trumpeting about, that the IPO of Alibaba Group Holding should be the largest in history, and now bankers spontaneously create big problems for themselves: how do they keep shares, as soon as they start trading?
While, how all major IPOs were carried out rigidly and clearly, there are some specific hurdles in the public offering of an e-commerce company.
Firstly, deal, probably, will be more than $20 billion, according to people, having data about it. Bankers believe, that they will have to make orders so large, to quadruple the size of a deal from large institutional investors, to create sufficient demand and to keep stocks growing in the days after their release. To do this, you will have to look for buyers., willing to fork out for $1 billion or more for a part of the transaction, to meet the demand. “This is problem, which keeps me awake at night”, – said one person, who intends to participate in the sale of shares.
Alibaba has already challenged American investors, who may not know the business, because the company mainly operates in China. It also had to answer questions from regulators and investors about its governance structure and the structure of some of its assets., which, due to restrictions in foreign ownership of China, are separate and owned by other companies.
But there is another problem.. Although Alibaba is a Chinese company, she is registered in the Cayman Islands, and will transfer money to American markets. It means, that Alibaba after the IPO will not be able to qualify for inclusion in many major indices, such as S&P 500 or some of the MSCI indices, that track members' trillions of dollars in funds. If the stock is not in a certain index, some funds will not be able to buy it.
Index S&P 500 includes only those companies, permanently located in the USA The index is one of the most popular among investors, nearly $5,1 trillion of assets are tracked precisely by the S index&P Dow Jones.
Selected Chinese and Emerging Market Indices, which usually include non-US companies, may also exclude a company from their structure. The company said, that its registered office and location precludes it from joining most of the major indexes from the FTSE Group and MSCI, focused on emerging markets.
Besides, эксперты полагают, that Alibaba will not lose much from the lack of the ability to be present in some of the major indices, because. it will still have large and long-term shareholders, such, как Yahoo Inc. Softbank.
The risk of not getting enough demand after the IPO is well illustrated by the Facebook dig., which managed to hold the world's largest IPO in the field of technology at $16 billion c 2012 year, but its shares plummeted compared to the offering price in the first few months of trading.
Alibaba will also have a wide range of investors, since the funds, focused exclusively on purchases from Chinese firms – most obvious source of demand, it is not even necessary to always generate demand for purchases. It means, that Alibaba will have to hire portfolio managers, who will focus on each sector, from online retailers to consumers, as well as large global funds.
Another attractive point may be the fact, that Alibaba meets all the requirements for general internet investment, And, maybe, даже лучше, than the existing managerial positions in such companies, как eBay или Amazon.with.
“If anyone wants to spend $1 billion on Alibaba shares, they will find this money ", – said the man, involved in the IPO process.
Some firms are able to find money on Alibaba, buying shares of other companies, holding large stakes in Alibaba, including Softbank and Yahoo. Alibaba may also be seen as a replacement for a number of other Chinese stocks, because the company is seen as a potential candidate for the growth of Chinese consumption.
Investment Director at CUPPS Capital Management in Chicago, which oversees $1,3 billion, Said, that his funds, usually, focused on American stocks, but allow on 5% or 10% to give from the fund for investments in foreign companies. Он также сказал, what does not know yet, will he buy Alibaba shares.
AND, finally, unlike some of the big Chinese IPOs in recent years, Alibaba will not have the same access to the domestic Chinese retail market, which previous deals had. Outside qualified institutions, including China Investment Corp., there are restrictions for individuals to buy shares, which are located only abroad.
