Alibaba roadshow bodes well for record-breaking IPO

Updated: 2014-09-13 17:37


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"Our analysts were impressed with the management team, especially Jack Ma's entrepreneurship. Investors are attracted to the scale of the business, China's fast growing online market, and its profitability," Smith noted.

Alibaba's growth rate beat its US rivals like and eBay. According to its filing with the SEC, Alibaba's profit was $1.99 billion in the quarter ending on June 30, almost tripling that of the same period a year ago, while its quarterly revenue surged 46 percent to $2.54 billion.

Alibaba's three major platforms, Taobao, Tmall and Juhuasuan, generated a gross merchandise volume of $296 billion from 279 million active buyers and 8.5 million active sellers in the 12 months ending on June 30, the filing showed.

Investors have some concerns over the e-commerce giant's governance and its 30-member partnership. But Colas said he has spoken to investors that have been at the roadshows. "I think everybody gives management credit for being open about what the management structure is going to be, what the ownership structure is going to be", he said.

"Honestly, I haven't spoken to anybody who is not interested in buying only because of the management structure," he added.

Colas said that the good thing about the stock market is that if investors are not satisfactory about company's answers and don't like its structure, they can choose not to purchase.

Otto said that certainly some investors would like more answers and clarification. "However, they sold out in the first couple of days... So certainly I think that people are actually taking that into consideration, and looking at the upside more than the downside."

Many steps before successful IPO

Despite the oversubscription of Alibaba's offerings, analysts pointed out that there are still many steps to go before there is a successful IPO.

Step one is to really understand where demand is globally, Colas said. Additionally, underwriters have to assess and balance demand from institutional and retail investors, and then consider a fair price for the demand.

"So it's going to be a lot of work over the next week for the company and for the banks," he said.

Another question is that where the stock will be traded on the first day of listing, Colas said. "On average in the US this year, IPOs have gone up 10 percent over the first day, and that number holds over the first month as well," he said.

Meanwhile, Renaissance Capital's data showed that "very large IPOs do not tend to have sizable first day pops, which will enable many investors to own Alibaba once it is trading," said Smith.

She added that once Alibaba has been trading for a week, the company will be included in Renaissance IPO ETF (Exchange Traded Fund), a portfolio of the largest, most liquid and newly public companies managed by Renaissance Capital.

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