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Alibaba shares sell well

September 19, 2014

Shares in Alibaba, the Chinese e-commerce giant, are selling briskly as institutional investors get into position for Friday's initial public offering on the New York Stock Exchange, expected to be the biggest IPO ever.

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Jack Ma Founder of Alibaba
Image: picture-alliance/dpa

On Thursday, Alibaba Group Holding raised $21.8 billion by selling shares to institutional investors in advance of the company's IPO. Alibaba's underwriters priced the company's shares for Friday's initial public offering at $68, near the top end of the range that analysts had expected.

At $68 a share, the company is valued at nearly $168 billion (130.45 billion euros).

Alibaba is selling 320 million shares, equivalent to about 13 percent of the company's capital. Nearly two thirds of those shares are being sold by existing shareholders, including company founder Jack Ma, who will reap $867 million. The balance will be newly issued shares.

The high IPO share pricing reflects Alibaba's dominance of Chinese e-commerce, and its strong financial performance. Alibaba's revenue surged 46 percent in the April to June quarter on strong gains in its mobile business, with net income attributable to its shareholders nearly tripling to $2 billion, or 84 cents a share.

From a tiny seed, a giant grew

Jack Ma, who founded the company in a one-bedroom apartment, will have a paper fortune worth some $14 billion as a result of the IPO. The deal is also expected to make millionaires out of many of the company's managers, software engineers and other staff.

Alibaba, based in Hangzhou, China, runs a group of internet-based e-commerce businesses. It dominates retail e-commerce and consumer-to-consumer online sales in China, and also offers online payment services, a shopping search engine, business-to-business web portals, and cloud computing services.

Alibaba's websites generate more than 60% of all parcel deliveries in China.

Cornerstone Alibaba investors like Japan's Softbank and Yahoo are set to profit handsomely from their early backing of Ma's company. Yahoo is selling $8 billion worth of shares in the offering, leaving it with a 16.3 percent stake in Alibaba. Softbank is not selling for now, and will be left with a 32 percent stake, making it the largest single shareholder.

Many investors and analysts are betting that there is still room for a substantial first-day jump in the shares after they start trading on the NYSE on Friday.

nz/uhe (Reuters, AP)