Alibaba Ipo Analysis
Autor: Sharon • December 31, 2017 • 1,147 Words (5 Pages) • 841 Views
...
(in US$)
Per ADS
Total (in $M)
Price to public
68
21767,21
Proceeds, before expenses, to Alibaba
67,184
8268,8
Proceeds, before expenses, to the selling shareholders
67,184
13237,21
Expenses related to the IPO for Alibaba were expected to US$49,67m.
Expenses
Amount (in $M)
SEC registration fee
3,22
New York Stock Exchange listing fee
0,25
Financial Industry Regulatory Authority filing fee
0,23
Printing and engraving expenses
1
Independent financial advisory fees and expenses
9
Legal fees and expenses
15,78
Accounting fees and expenses
5
Miscellaneous
15,19
Total
49,67
Alibaba's banking syndicate was composed of 35 underwriters, divided into three tiers, with the six joint bookrunners on top, followed by eight banks who had been invited to analyst meetings, and a third tier of banks helped sell the deal. Total underwriting discounts and commissions to be paid to the underwriters are shown in the following table.
Per ADS
Total ($M)
No Exercise
Full Exercise
Discounts and commissions paid by Alibaba Group
0,816
100,43
121,76
Discounts and commissions paid by the selling shareholders
0,816
160,78
178,62
Total
261,21
300,38
IV. Level of under or overpricing and explanations[pic 12]
[pic 13]
Short term underpricing:
((Price First Day – Price Offer)/Price Offer) x 100 => ((93,89-68)/68) x 100 = 38,1%.
- With an extremely high demand from investors, this IPO was three times oversubscribed, generating an important delta between IPO price ($68) and the trading price at the end of the first day ($93,89). Indeed, the bigger demand you have, the higher the share price will be. Moreover, the allotment of the IPO, between 35 underwriters with a worldwide coverage of institutional investors amplified this underpricing.
- Regarding F-1 document, Alibaba has never distributed dividends and don’t plan to pay any in the future, meaning that to attract investors with solid returns, underwriters had to set a low IPO price, since all gains from investors will only come from stock price appreciation.
- Alibaba might want to avoid Twitter or Facebook cases, of which both stock prices fell under IPO price at some point. Regarding Alibaba’s important cash needs for future developments, it’s important for the group not to send wrong signals to investors in case of future market solicitation for capital increase.
Long term Overpricing:
((Price End 1st Year – Price Offer)/ Price Offer) x 100 = 3,3%
Long term overpricing of Alibaba’s share might not be so significant considering the reasonable fall under the IPO price the stock has experienced for a very short period of time before going up, but could be explained with:
- Rising uncertainties about China’s economy. Indeed, according to World Bank, GDP growth would reach a 7,1% low in 2015 and Chinese stock market has been experiencing a period of high volatility, with important value destruction for individual stockholders that might slow down their consumption, impacting Alibaba’s capacity to expand its sales in China.
- Large acquisition in Suning Commerce Group ($4,6bn on August 2015), a Chinese electronic
...