Alibaba offering seen dampening fortunes of peers
Bloomberg in New York
Alibaba Group's potentially record-breaking initial public offering risks handing losses to investors in the rest of the Chinese internet stocks listed in the United States.
The operator of China's largest online marketplace filed this month for what could be the largest US IPO, creating competition for investor cash going into new technology stocks.
Analysts surveyed estimate the company's total value at US$168 billion, only about 15 per cent less than the combined market capitalisation of 35 Chinese information technology firms listed in the US.
Investors are poised to sell other Chinese dotcom stocks to free up cash for the offering, which is projected to raise about US$20 billion, according to Blackfriars Asset Management.
Alibaba is preparing to debut in the market after an index of Chinese dotcom companies plunged 15 per cent in the past two months amid concern earnings growth will slow as the government cracks down on online pornography and tightens censorship.
"Dedicated portfolio managers may have to sell some holdings to buy Alibaba if they think the IPO price is attractive," said Tony Hann, the head of emerging-market equities at the London-based firm. "It adds a bit more selling pressure and people are paring back their enthusiasm."
Alibaba, which sells everything from Alaska salmon to Boeing 747 jet parts, has not specified how much it expects to raise in the IPO.
People familiar with the matter have said the company plans to sell a 12 per cent stake.
Ashley Zandy, a spokeswoman for Alibaba, declined to comment on the IPO and its market impact.
A US$20 billion IPO would exceed Visa's record US$19.65 billion offering in 2008. The aggregated market value of the biggest Chinese information technology companies listed in the US, including Baidu, the nation's largest search engine, is US$197 billion.
"The Alibaba IPO will impact the sector negatively, especially in e-commerce," said Henry Guo, a senior analyst at ABR Investment Strategy. "Funds tend to limit their exposure to individual countries, and they may have to sell some companies to make room for Alibaba."
Alibaba was founded in 1999 with an initial US$60,000 investment by Jack Ma Yun, a former English teacher. The ranks of Chinese internet users have grown to 618 million and could exceed 850 million by 2015, according to government data.
Consultancy McKinsey predicts online retailing in the world's second-largest economy will reach US$395 billion next year, triple its 2011 level.