Alibaba sets IPO share price, to raise $25 bn

September 19, 2014
Online retailing giant Alibaba employees/AFP
Online retailing giant Alibaba employees/AFP

, Alibaba decided to list in New York because it wanted an alternative class share structure to give selected minority shareholders extra control over the board; the Hong Kong bourse declined to change its rules to allow this.

The Chinese firm will trade under the symbol “BABA”.

A US government panel has warned of risks to investors because of a complex corporate structure — Alibaba is registered in the Cayman Islands and controlled by a partnership through a series of shell companies.

Harvard law professor and governance specialist Lucian Bebchuk meanwhile warned that the structure, which allows inside minority shareholder control at Alibaba, is worrisome.

“With an absolute lock on control and a limited fraction of the equity capital, the Alibaba insiders will have substantial incentives to divert value from Alibaba to other entities,” Bebchuk said in a New York Times blog this week.

The IPO is also a major event for US-based Yahoo, which bought a 40 percent stake in the Chinese online giant in 2005 for $1 billion and still holds 22.4 percent. The California company is expected to walk away with some $10 billion paring that stake down to 16.3 percent.

 

– Huge war chest –

 

Alibaba’s record-setting stock offering will give the Chinese online group a huge war chest that can help its global expansion.

Yet it remains to be seen whether the IPO will propel Alibaba into being a challenger for the dominant technology firms like Amazon, Google and eBay, analysts say.

Warwick Business School professor Qing Wang, who researches Chinese enterprises, said the IPO could be a watershed moment.

“Alibaba’s IPO could well be the end of US dominance in the world technology sector,” Wang said.

“Alibaba’s annual growth rate of more than 30 percent shows that the gap between the Chinese companies, Alibaba and Tencent, and US companies is getting ever closer.”

Some analysts were more sceptical.

“Despite its dominance in China, Alibaba won’t be sweeping away US market share in the near future,” a Forrester Research report said this week.

“Rather, it will take a major acquisition or a number of years for Alibaba to pull together a platform that could compete with major players like Amazon, Apple, eBay, and Facebook.”

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