Aug 8 Debut Evades Alibaba IPO, Sept In Sight
The date of August 8 is a lucky one for many Chinese, but it’s increasingly looking like it won’t be the day for the highly anticipated IPO of e-commerce leader Alibaba. Previous reports had indicated Alibaba founder Jack Ma wanted to list his company on the eighth day of the eighth month of the western calendar, since 8 is a lucky number that sounds like the Chinese word for wealth and prosperity. What’s more, the Chinese pronunciation for 8-8 is “baba“, which is the same as the last part of Alibaba’s name and also happens to be the BABA ticker symbol the company will use when its shares start trading on the New York Stock Exchange.
But it seems that time wasn’t assisting Alibaba, which had lots of work to do before an offering that some say could raise up to $20 billion and could value the firm at about $150 billion. Raising that kind of massive amount requires talks with many major investors, which takes lots of time. Making matters equally tricky, Alibaba has to convince investors that it’s worth more than most of the world’s other major Internet companies, including such leading names as Twitter (NYSE: TWTR) and LinkedIn (NYSE: LNKD), and not much less than global e-commerce leader Amazon (Nasdaq: AMZN).
Adding to the potential delays, Alibaba had to recently renegotiate an agreement that was supposed to see major shareholder Yahoo (Nasdaq: YHOO) provide most or all of the shares for the massive IPO. That means Alibaba not only had to renegotiate that deal, but also had to find alternate sources for shares to offer in the IPO. Of course all of this was happening as the August 8 date drew closer, and it’s now exactly just 3 weeks away.
The first signs that Alibaba wouldn’t make the August 8 date emerged last week, and now the latest reports are citing unnamed sources saying the road show and offering may not even come until September. (Chinese article) The reports cite seasonal issues as a factor in this case, since many Americans are on vacation during the summer holidays and thus won’t be available to attend road show sessions by Alibaba executives.
As a former reporter, I know the summer months of July and August are indeed the slow season for news, and that many companies will delay major meetings and announcements until September and October after most people return from vacations. At the same time, the size of the offer and the company’s high valuation are almost certainly factors in the delay, and it’s even possible we might not see a trading debut until as late as early October.
So, what’s the bottom line in all of this? The answer is that none of these delays are cause for concern for anyone who wants to invest in Alibaba. Yahoo is clearly bullish about Alibaba’s future, which is why it decided to retain a bigger stake of the company than it previous agreed on. There also aren’t any particular trouble signs in the Chinese e-commerce market. To the contrary, companies could even get a boost as the Chinese regulator looks set to relax a controversial unconditional return policy for products purchased online. (previous post)
At the end of the day, the August 8 date was probably overoptimistic due to the complexity of the deal and also unrealistic due to its timing in the middle of the school summer holidays. But I’m sure Jack Ma can find another lucky date in September or October. And no matter what day the company’s shares ultimately debut, Ma and many other Alibaba employees will ultimately emerge as very rich people at the end of that day.
Bottom line: Alibaba’s IPO is likely to be delayed to September or even October due to its complexity and seasonal factors, but should still receive a strong reception from investors.
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