Alibaba Plans IPO for After Labor Day
Investors will have to wait a little longer for a chance to buy into the year’s most-anticipated initial public offering.
Alibaba Group Holding Ltd. on Thursday decided to push back its IPO—which could raise more than $20 billion—until after the Sept. 1 Labor Day holiday.
Leaders of the Chinese e-commerce giant, including founder and executive chairman Jack Ma, and their bankers worried there wasn’t enough time to complete all the needed steps for the deal before their preferred launch date at the end of this month, according to people with knowledge of the decision.
Alibaba’s timing was always aggressive. The company was hoping to launch one of the biggest-ever IPOs less than three months after filing official documents for the offering. Many issues remained unresolved, including which existing investors will sell their shares as part of the deal, the people said. Discussions with current shareholders became more complicated after longtime shareholder Yahoo Inc. said this week it would sell a smaller stake than earlier announced, the people added.
Bankers are also far away from putting a firm value on the company and setting a potential price range for the shares, people familiar with the transaction said. In addition, Alibaba is considering including second-quarter earnings as part of its IPO prospectus, and would require a full audit of those results, they said.
Meanwhile, acquisitions and other business announcements slowed the process of writing IPO documents and took the attention of senior managers, people familiar with the deal said. This week, Alibaba announced a partnership with Lions Gate Entertainment Corp. LGF +0.35% , and recently has taken stakes in companies including a Web browser and a Chinese soccer team.
The company still is in discussions with the U.S. Securities and Exchange Commission over completing its IPO paperwork, people familiar with the matter said. It anticipates receiving additional comments next week, though it isn’t yet clear if those will be the final queries, the people said. The deal can’t launch without the agency’s blessing.
IPOs can take about two weeks from when they launch to when shares start trading and the company had hoped to wrap up the process by mid-August. The concern, the people said, was that a small delay in the next couple of weeks would push the share sale into late August, when many investors take vacations.
One factor that gave the company comfort in its decision to wait was the muted market reaction to testimony this week from Federal Reserve Chairwoman Janet Yellen, people familiar with the deal said. The worry had been that she could spook markets by advocating tighter monetary policy, but her comments didn’t give that impression. The market reaction left Alibaba and its bankers less fearful about a stock pullback going into the fall, the people said.
The six banks selling the company’s shares are Credit Suisse Group AG , Deutsche Bank AG , Goldman Sachs Group Inc., J.P. Morgan Chase J, Morgan Stanley & Co and Citigroup Inc. Rothschild also is advising the company and working with the banks.
Though Alibaba has attracted global investor interest, the process of selling more than $20 billion of shares isn’t easy. Many outside events—such as violence in the Middle East or a sudden U.S. market plunge—could complicate the deal. The launch work involves people on three continents, including at the seven investment banks and five outside law firms.
Alibaba is planning on a robust “roadshow” of face-to-face meetings with investors to pitch the deal, with visits to Hong Kong, New York and London, and possibly Singapore and other cities in the U.S., people familiar with its plans have said. The company has wanted to ensure that top decision makers at investment firms would participate in the process and not be on vacation, they said.
“If you this give the company the proper amount of time to finalize its roadshow story and filing documents, investors may see that for the better,” said Chaith Kondragunta, chief executive of research firm AnalytixInsight Inc. Mr. Kondragunta has estimated that public markets could value Alibaba as highly as $230 billion, even though the company itself has estimated that it is now worth $130 billion.
The delay likely will ripple through the U.S. listing market.
A number of technology companies, including Chinese firms, had been planning to launch their deals a few days after Alibaba’s IPO, hoping that it has a strong trading debut and sparks demand for more deals, according to bankers. Those IPOs now likely won’t kick off until late September, they added.
Source: wsj
