Chinese e-commerce giant Alibaba issued its final prospectus Friday, setting up one of the biggest IPOs in history.
The giant company already has revenues considerably bigger than Amazon or eBay and, like Amazon, looks set to have a growing impact on the entertainment sector over the coming years. That’s even before it expands far outside China.
Shares will be sold in the $60-66 range and traded on the New York Stock Exchange. Final pricing will be decided on Thursday Sept. 18 with trading beginning the following day.
The company will sell 123 million new shares, which at the mid price means it will raise $7.75 billion. Other shareholders will be selling 197 million shares. Underwriters may offer a further 48 million, which could boost it to the biggest IPO of all time, at $23.2 billion.
With 2.46 billion shares in issue following the sale, the $63 mid price points to a market capitalization of $155 billion.
That puts it short of Facebook ($201 billion), on a par with Amazon ($153 billion) and several multiples ahead of eBay ($65 billion), Twitter ($32 billion), Netflix (29 billion), and Linked In ($27 billion).
On both an historic EBITDA to enterprise value ratio and on a forward valuation – assuming EBITA rises from $5.4 billion to $7.9 billion in the next 12 months – Alibaba stock looks cheaper than all of the above companies, with the exception of eBay.
Financial analysts appear to be divided as to whether they think that is good value or not. Some think the growth prospects look very attractive – with the stock representing a cipher for China’s transition into a consumer-led economy – while others remain cool to China stocks in general, and have specific worries about the limits of shareholder control at a conglomerate with a partnership structure that favors a group of core executives and founder Jack Ma.
Financial index managers Standard & Poors has said that Alibaba stock will be included in a number of its indexes, which means that many fund managers operating relevant index-tracking funds and ETFs. However, it will be excluded from the Dow Jones Industrial Average and the S&P 500 Index. That’s because those indexes only include stocks S&P deems as being U.S.-domiciled.
Despite the contradictions, many analysts, seem confident that the share issue is being priced carefully enough to ensure that the IPO gets off to a positive start and avoids the initial launch embarrassment suffered by Facebook.