Alibaba raises IPO price

Investors bullish on Chinese e-commerce giant

Alibaba Group Holding Ltd has raised its IPO price from $66 to $68, which analysts said Tuesday is a reflection of strong investor enthusiasm for the potentially largest listing in the US technology history.

In an updated prospectus filed by Alibaba on the US Securities and Exchange Commission later Monday (US time), the company proposed to raise up to $25 billion from its New York IPO with a maximum price of $68 per share, higher than the price of $66 it submitted on September 5.

The company had to lift the indicative price due to overwhelming demand, Tang Jia, an industry analyst with Beijing-based market research firm Analysys International, told the Global Times Tuesday.

"I was informed that on the second day of their two-week multi-city marketing blitz, Alibaba has already been able to raise the previously planned amount based on the would-be buyers' offers," she said.

The Chinese e-commerce giant, which handles more transaction volume than the combination of Amazon and eBay, has aroused big interest in the US stock market. Some 800 investors attended the first-day roadshow in New York on September 8, while the company was reportedly expecting about 500.

Wang Tingting, an industry analyst with iResearch, another market research firm in Beijing, said that investors appear to have already begun earmarking capital for Alibaba's IPO, which likely dampened technology stocks in the US market.

In Monday trading, NASDAQ-listed jd.com, the second-largest online retailer in China, saw its share price drop 1.3 percent to $28.87 and the share of Amazon on the NASDAQ stood at $323.89 after a 2.2 percent fall.

The Alibaba IPO is expected to be priced on Thursday and the trading is scheduled to open on Friday, a source familiar with the deal told the Global Times Tuesday on condition of anonymity.

Given the current strong interest from institutional investors, both Wang and Tang said that Alibaba will surely see a premium on its debut day, though the maximum price is a little bit higher for private investors.

The prospectus shows that Alibaba's three online marketplaces - flagship customer-to-customer taobao.com, business-to-customer (B2C) tmall.com and group sales site Juhuasuan - handled combined 1.8 trillion yuan ($296 billion) in transactions from 279 million active users and 8.5 million active sellers in the 12 months ending June, 2014.

According to a report by iResearch issued in August, Tmall led China's B2C market by transaction volume with a 57.3 percent share in the second quarter of the year, followed by jd.com with 21.2 percent.

Wang believes that Alibaba has great long-term business prospects, as the company has an unmatched market share among China's e-commerce operators and the online shopping market still has room for rapid growth.

"Only half of Chinese Internet users buy goods online currently," he remarked.

However, Tang is concerned about some potential red flags for Alibaba's future, suggesting that investors should be cautious.

She noted that although there are still many Web users yet to get used to shopping online, most of them are from less-developed third- and fourth-tier cities, signifying challenges facing online shopping platform operators to expand their business.

Data from iResearch indicates that the pace of growth of online e-commerce transaction volumes has started to slow, with growth rate estimated to be 27 percent year-on-year in 2014 and 24.4 percent in 2015.

It seems that Alibaba founder Jack Ma Yun has sensed the trend. While indicating the company will focus on the Chinese market during its roadshow in New York, Ma said on Monday in Hong Kong that it plans to expand its business in the US and Europe.

Hong Kong was expected to be the first option for Alibaba's IPO, but the bourse missed the potentially largest-ever IPO in the world because of issues related to company's corporate governance. Ma said during the sales pitch that the company will continue to love Hong Kong and invest in the market.

According to media reports, Ma will become a permanent resident in Hong Kong by the end of 2015 via property investment.