Alibaba Group Holding Ltd. (BABA:US) may price its initial public offering about 22 percent below analyst valuations, according to a survey of estimates, a move that could avoid repeating the listing flop of Facebook Inc. (FB:US)
China’s biggest e-commerce company may set the IPO value at $154 billion, according to the average estimate of five analysts surveyed by Bloomberg. The same analysts see the post-listing valuation as $198 billion. Alibaba will wait until September to hold the IPO, a person with knowledge of the matter said.
Alibaba’s IPO may be the biggest in U.S. history when it lists on the New York Stock Exchange as the company attracts investors keen to tap into the surging Chinese economy and the world’s biggest pool of Internet users. Valuations of the company surged from $62.5 billion about a year ago after earnings nearly tripled, with a listing discount seen as a way to avoid the plunge that greeted Facebook’s debut in 2012, said Li Yujie, an analyst at RHB Research Institute Sdn in Hong Kong.
“Alibaba is raising so much money, for the market to support that, it’s logical that it provides some discount to investors at the time of the IPO,” Li said. “It has a lot of potential, but investors want to see a few quarters of results and also see how the company will strategically place itself.”
Li said Alibaba, based in Hangzhou, could have a valuation of $200 billion, though it might be $50 billion short of that at the time of the IPO pricing.
Alibaba will wait until September for the IPO as it seeks regulatory approval, according to a person familiar with the matter, who asked not to be identified because the process remains private. The company is continuing talks with the U.S. Securities and Exchange Commission, the person said.
The company had been targeting an early August debut that would have had its executives on the road to meet investors as soon as this month, people familiar with the situation said as recently as July 16.
Florence Shih, a Hong Kong-based spokeswoman for Alibaba, declined to comment on analyst valuations. Ashley Zandy, a spokeswoman for Alibaba, declined to comment on the IPO process.
The IPO is set to eclipse Facebook’s as the biggest in the technology sector, when the owner of the world’s largest social network raised $16 billion in 2012 selling stock at $38 apiece.
Facebook had a price tag of $104 billion at the time of its IPO and went on to lose half its market value as investors worried about slowing growth and the company’s mobile strategy. The stock has since recovered.
“We believe the biggest controversies on Alibaba are around mobile monetization, the evolution of margins, and capital allocation,” said Carlos Kirjner, a New York-based analyst at Sanford C. Bernstein & Co.
An IPO pricing for Alibaba of about $150 billion “would be attractive,” said Kirjner, who values the company at as much as $210 billion.
Alibaba may be worth $187 billion, according to a survey of 11 analysts by Bloomberg, including those who didn’t expect an IPO discount. The company was valued at $168 billion in an April survey of 10 analysts.
The company, which filed for its U.S. IPO in May, could sell a 12 percent stake, according to people familiar with the matter. That would mean Alibaba could raise as much as $18 billion at the discounted analyst valuation or more than $22 billion at the higher estimates.
Yahoo! Inc. (YHOO:US), Alibaba’s second-largest shareholder, this week said it will return half the cash it reaps from the IPO to shareholders after scaling back the amount of stock it plans to sell. The Sunnyvale, California-based Web portal has a stake of about 23 percent stake while SoftBank Corp. (9984), the Japanese wireless carrier, owns more than 30 percent.
Alibaba and its backers are likely to account for more of the IPO and make up the difference, people with knowledge of the matter have said.
Gene Munster, an analyst at Piper Jaffray Cos. (PJC:US), topped the estimated valuations at $221 billion. Alibaba’s profit rose 32 percent to 5.54 billion yuan ($893 million) in the March quarter.
Alibaba operates platforms including Taobao Marketplace and Tmall.com that connect retail brands with consumers. The Chinese company makes most of its sales from commissions and advertising.
Alibaba’s effort to attract smartphone users are a key plank of its growth strategy, and the company had 163 million mobile monthly active users in March, according (BABA:US) to its filing to the U.S. Securities and Exchange Commission.
Mobile transactions accounted for 27.4 percent of Alibaba’s total transactions in the three months ended March, up from 19.7 percent in the previous quarter, according to its filing (BABA:US).
China has 618 million Internet users, greater than the population of any other country except India, and could exceed 850 million by 2015, according to government data. McKinsey & Co. predicts online retailing in the world’s second-largest economy will reach $395 billion next year, triple its 2011 level.
Alibaba named Yahoo co-founder Jerry Yang and Tung Chee-hwa, the former chief executive of Hong Kong, as independent directors. Michael Evans, who served as vice chairman of Goldman Sachs Group Inc. until he left the firm last year, also was named a director on Alibaba.
Alibaba has announced 26 deals worth $16 billion since the start of 2012, expanding into everything from finance to soccer to media entertainment and taxi booking services.
The acquisitions may be slowing down the approval process, said Max Wolff, an independent analyst who has been following Alibaba closely.
“It was probably do-able to get it out in August, but ambitious,” Wolff said. “They have been on an acquisition superstreak. That’s much less positive for speed.”
The company agreed in June to acquire the rest of UCWeb Inc. to add Internet browsers and an application store to its services for mobile devices and in May bought a 10 percent stake in Singapore Post Ltd. (SPOST)
It also invested in Youku Tudou Inc. (YOKU:US), Intime Retail Group Co. (1833) and TangoMe Inc. and on July 15 announced plans for a video streaming service in China with Lions Gate Entertainment Corp. (LGF:US)
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