Alibaba Raises Projected Price Range for Market Debut

Alibaba Executive Chairman Jack Ma began the Asian leg of his e-commerce giant's global IPO roadshow in Hong Kong Monday. WSJ's Ramy Inocencio reports the company may raise the price range for shares ahead of their trading debut Friday in New York.

HONG KONG—Alibaba Group Holding Ltd., which is in the middle of marketing what could be the world's largest initial public offering, now thinks it could do a little better.

The Chinese e-commerce firm has raised the deal's price range to $66 to $68 per share, up from the current $60 to $66 a share. Alibaba didn't increase the number of shares that can potentially be sold.

At the top of the new price range, the deal would raise an initial $21.8 billion for the company and some of its current shareholders, with the potential to expand it to $25 billion if the banks underwriting the deal exercise an option to buy more stock to satisfy demand.

Alibaba has already received plenty of demand for the deal at the previous price, and decided to begin to close the order books as soon as Tuesday for some investors, people familiar with the deal have said.

The company is set to price its offering on Thursday after the U.S. market close and begin trading on Friday on the New York Stock Exchange under the symbol BABA, the people added.

Currently, Alibaba's top executives are meeting with investors in Hong Kong, after meeting with investors in New York, Boston, San Francisco and other U.S. cities last week, people familiar with the deal have said.

At the company's Asian roadshow launch, held at the Ritz-Carlton hotel in Hong Kong, Alibaba founder and Executive Chairman Jack Ma addressed hundreds of members of the media in English and Chinese, dressed in a navy blue jacket, before a luncheon. The hotel's security staff kept reporters away from the luncheon.

Before heading into the event, Mr. Ma told reporters that Alibaba plans to expand aggressively in the U.S. and European markets after its listing. He also said Alibaba missed a "great opportunity" to list in Hong Kong.

"We respect Hong Kong's decision…. Hong Kong shouldn't change its principle for one company," Mr. Ma said.

Alibaba decided to list in New York instead of Hong Kong because Hong Kong's stock exchange refused to accept its partnership structure, which allows Mr. Ma and other executives to nominate more than half of the company's board. (Explore an interactive defining Alibaba).

About 500 people attended Monday's luncheon in Hong Kong, a person familiar with the matter said, where Western food was served.

In attendance were Mr. Ma, Chief Executive Jonathan Lu, Executive Vice Chairman Joe Tsai, Chief Operating Officer Daniel Zhang and Chief Financial Officer Maggie Wu, according to a person familiar with the matter.

Mr. Ma started his presentation with an introduction about himself and Alibaba, according to investors who attended the meeting. During the question-and-answer session, which lasted 45 minutes, Mr. Ma frequently made the audience laugh with answers to questions ranging from his views on competition, Alibaba's growth strategy and the company's relationship with the Chinese government, investors said.

When asked why Alibaba had recently bought into different business sectors, Mr. Ma replied that Alibaba wants to be a "zoo that houses many animals rather than a farm which just has one animal," investors said.

Alibaba has made more than a dozen acquisitions this year as it tries to tap into the next online boom market in Chinese consumption and compete with other rapidly expanding Internet companies, such as Tencent Holdings Ltd. TCEHY +0.13% Alibaba paid more than $1 billion for a 16.5% stake in Youku Tudou, an online video-site operator, and spent $194 million for a 50% stake in the Guangzhou Evergrande professional soccer team.

According to several attendees, Mr. Ma also spoke about his vision to broaden Alibaba's business to handle both online and offline transactions and to strengthen the company's services for mobile-phone users.

"I never think about competitors," Mr. Ma said, when asked about the company's landscape of challengers, according to a video taken at the presentation that was seen by The Wall Street Journal. "There is a Chinese saying: If you don't have [an] enemy in your heart, then you don't have an enemy."

"How can we make sure our culture can help attract, train and develop enough young people that can help small businesses do business easier in the world—this is the thing I worry the most," he said.

"Alibaba has a leading position in an e-commerce sector that we can't miss and the valuation with the current price range is reasonable," said Alex Au, managing director of Alphalex Capital Management Ltd., noting that he plans to place buy orders in the IPO.

Alibaba, based in the eastern Chinese city of Hangzhou, was founded in 1999. It operates the Taobao and Tmall online marketplaces, which have hundreds of millions of users in China. Transactions handled by Taobao and Tmall last year amounted to $248 billion, larger than comparable figures for Amazon.com Inc. AMZN -2.20% and eBay Inc. EBAY -2.36% combined.

nvestors see a lot of potential growth in Alibaba's earnings, as China's e-commerce market continues to expand. In the quarter ended June 30, Alibaba's revenue rose 46% from a year earlier to $2.5 billion. Its net profit for the quarter surged to $2 billion from $705 million a year earlier, but that was due largely to an investment gain. While Alibaba doesn't sell products itself, the company earns most of its revenue through advertising fees and commissions paid by merchants who use its marketplaces.

"Our top concern is Alibaba's acquisition strategy and how the new investments will accelerate its future growth amid intensifying competition in China's mobile Internet market," said an investment manager at an Australian pension fund.

 

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