Alibaba to Detail Internet Business in New IPO Document; Move Is in Response to Concerns From Potential Investors

Alibaba to Detail Internet Business in New IPO Document

Move Is in Response to Concerns From Potential Investors


Updated June 12, 2014 10:26 p.m. ET

Alibaba Group Holding Ltd., responding to concerns from investors that it has been too tight-lipped, plans to give out more details about its Internet empire as it readies its potential $20 billion initial public offering, said people familiar with the matter.

The Chinese e-commerce company, which plans to go public in the next few months, is preparing a new regulatory filing that will give metrics on some of its individual businesses, the people said. It will also disclose the names of the 28 partners with the power to nominate the company’s board, the people said. The new filing could arrive as soon as Friday, but next week is more likely.

Alibaba and its banks are responding to some complaints from investors that the company’s initial IPO filing was too vague and didn’t give them enough information to size up the company.

While companies are typically eager to keep investors happy, the stakes in this case are higher because the company’s IPO could be the biggest ever. The sheer number of shares up for sale means bankers need to ensure there is deep enough demand from the largest investors.

Bankers have received some general feedback from investors, the people said, though the formal pricing and sales process isn’t expected to begin until later in the summer.

Despite the global attention the coming share sale has commanded, the company and its bankers aren’t expecting the job of placing the large chunk of stock to be easy, said the people familiar with the deal. Some big investment firms are expected to consider buying as much as $1 billion worth of stock, a slug that would make Alibaba one of the biggest holdings at some firms.

Alibaba’s bankers hope to have demand from big fund firms for at least four or five times the amount the company is selling, people familiar with their thinking said, to help ensure there is ample demand once the company’s stock trades publicly to buoy the price. In a typical IPO, bankers might seek orders from the biggest investors for just two or three times as much as they are selling.

That means if Alibaba wants to raise $20 billion, the underwriters will need to identify and generate demand for potentially more than $100 billion worth of shares to meet that goal. Credit Suisse Group AG CSGN.VX -0.54% , Deutsche Bank AG DBK.XE -0.98% , Goldman Sachs Group Inc., GS +0.32% J.P. Morgan Chase & Co., Morgan Stanley MS +0.13% and Citigroup Inc. are leading the offering.

To help make those sales, bankers hope that in the roadshow to pitch shares just before the offering, they will get meetings at big firms not just with an analyst or fund manager who looks at Chinese companies, but with people responsible for Internet and consumer companies.

They will also aim to get buy-in from fund managers’ executive leadership. For example at T. Rowe Price Group Inc., TROW -0.53% which manages more than $700 billion in assets, they would hope to have Brian Rogers, the firm’s chairman and chief investment officer, in a meeting.

“There will be no stone unturned,” said one person familiar with the process.

A spokesman for T. Rowe Price said such a meeting would be customary.

As for the new filing, it is set to show the gross merchandise volume—or total value of goods sold—of Alibaba’s individual Chinese retail businesses, including Taobao, Tmall and Juhuasuan, the people familiar with the plan said. Alibaba and its bankers believe that detail will address investor concerns that the company didn’t give enough metrics in its first filing for investors to intelligently forecast the future growth of the business, the people said. Alibaba’s business model is as a marketplace rather than a direct seller; its revenue is based largely on fees from merchants that use its services.

The company had gross merchandise volume of $248 billion last year for its Chinese retail businesses, more Inc., which had roughly $100 billion in transactions last year, as estimated by Forrester Research Inc., a market-research firm.

Some had anticipated Alibaba would break out how its two biggest businesses—Taobao, which facilitates selling by small businesses to consumers, and Tmall, which connects big brands to consumers—contribute to that, or how their figures have changed over time.

Companies often revise IPO documents after the initial filing. Alibaba is in the process of fielding questions from the Securities and Exchange Commission, which must approve the document before shares can be priced and sold.

Before that approval comes, and before the company sets an expected price range on the stock, the company cannot speak to investors. Its bankers, however, can talk to investors generally about the company, though they cannot solicit from investors whether they would invest, or at what price they would buy in, according to U.S. rules.

The listing, in New York, is currently being planned for the first half of August, though the timing isn’t set in stone, the people said. The company expects to shop the deal to investors globally, with large meetings in hubs possibly including Hong Kong, New York and London, they added.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: