Alibaba making final preparations for IPO

Alibaba is making final preparations for an IPO in Hong Kong early next week.

Chinese e-commerce company Alibaba.com is making final preparations for an initial public offering of shares on the Hong Kong stock exchange, set for Nov. 6. But most of the proceeds will go to existing shareholders rather than into the company's coffers to fund future acquisitions and other plans.

Alibaba's prospectus said the listing price would be set within a range between HK$12 (US$1.55) to HK$13.50 per share. While the final pricing has not yet been announced, Dow Jones Newswires reported that the listing price had been set at the very top of that range.

Nearly 859 million shares -- accounting for 17 percent of Alibaba's shares -- will be offered during the IPO, including 227 million shares owned by the company. The balance of the shares on offer are held by existing shareholders. The IPO attracted US$150 billion in orders from institutional investors and HK$453 billion in orders from individuals, making it "the biggest offering in Hong Kong's IPO history," according to the Dow Jones report.

Out of the HK$11.6 billion expected to be raised during the IPO about HK$3 billion will go to Alibaba, which plans to use most of the money for acquisitions and to develop new technologies.

Alibaba is one of China's oldest and most successful Internet companies, running a business-to-business trading portal under the Alibaba.com name, an online payment service, and China's most popular auction site, called Taobao.com. But while other Chinese Internet companies cashed in on investor enthusiasm for Internet stocks and China's growing market with listings in Hong Kong and New York, Alibaba -- which generated 73 percent of its revenue from outside China during the first half of 2007 -- remained privately held.

A 2005 deal with Yahoo took some pressure off Alibaba to go public. Yahoo invested US$1 billion in Alibaba in return for a 40 percent stake in the company, and transferred control of its Chinese operations to Alibaba. Approximately $750 million of the proceeds from that deal went to shareholders, allowing early investors in the company to take a return on their investments.

Yahoo's investment in Alibaba will likely increase, with the company expected to invest a further US$100 million through the IPO.

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