Alibaba.com raises IPO price range
Alibaba.com, the mainland's biggest portal, has raised the price range of its initial public offering by almost 13 per cent after receiving overwhelming orders from institutional investors.
The company would now market the shares at between HK$12 and HK$13.50 each, compared with the original range of HK$10 to HK12, market sources said.
The deal will raise up to HK$11.6 billion and value Alibaba at HK$68.6 billion, or 54 times estimated profit for next year before stock-based compensation.
Nasdaq-listed Global Sources, Alibaba's closest rival, trades at about 33 times estimated earnings.
Despite Alibaba's higher valuation, investors are keen on the shares, and sources said the institutional tranche had been 50 times covered.
'The stock is very hot,' said a fund manager who subscribed to the offer. 'Investing in China internet companies, you have to have imagination.'
Alibaba's chief executive David Wei said the price to earnings ratio was reasonable because investors were upbeat on the company's profits for next year and 2009.
'In fact we can set the price even higher but we also think more investors should benefit from our strong growth,' Mr Wei said.
The listing document shows that profit is expected to be at least 622 million yuan this year, up from 219.9 million yuan last year.
'Alibaba has a solid user base, but it needs to develop more ways to charge its users,' said Jacky Huang, senior analyst at market research firm IDC China.
The company estimates net proceeds from the offering will range from HK$2.6 billion to HK$3 billion. It will use HK$1.57 billion to HK$1.77 billion for strategic acquisitions and business development initiatives to enhance its brand.
'We want to expand our business to international markets through this IPO and join the global e-commerce market,' said chairman Jack Ma.
Alibaba shares are scheduled to be priced on October 27 and begin trading on November 6.
Separately, Fuzhou-based online game company NetDragon, which is seeking a listing on the Growth Enterprise Market, has also raised the indicative price range of its initial public offering to between HK$11.18 and HK$13.18 from HK$10.24 to HK$12.11 a share, people familiar with the situation said.
'The order book was fully covered on the second day, giving sponsors and companies the confidence to raise the price range,' a source said.
Based on the top-end of the new range, NetDragon will raise HK$1.42 billion from the deal.
IDG Group will hold about 14.5 per cent of NetDragon after the listing.
IDG has previously invested in high flyers such as Baidu.com, the largest search engine in the mainland; Ctrip.com International, the largest online travel site; and Sohu.com, the second-largest internet portal.
NetDragon shares are expected to be priced on Friday and begin trading on the Hong Kong stock exchange on November 2.
