At US$25b, Alibaba IPO becomes the world's largest

[NEW YORK] Alibaba Group Holding's initial public offering became the biggest ever at US$25 billion, after bankers exercised an option to boost the deal size by 15 per cent on strong demand, a person familiar with the matter said.

The underwriters exercised a so-called greenshoe option to sell an additional 48 million American depositary shares, said the person, who asked not to be identified as the information is private. Credit Suisse Group, Deutsche Bank, Goldman Sachs Group, JPMorgan Chase & Co, Morgan Stanley and Citigroup managed the offering.

Shares of Alibaba soared 38 per cent on their Friday trading debut, the biggest first-day jump for an IPO of at least US$10 billion, data compiled by Bloomberg show. Its dominance of a booming e-commerce industry in the country of 1.36 billion people attracted interest from money managers including Fidelity Investments, BlackRock and T Rowe Price Group, who each asked for at least US$1 billion of shares, people familiar with the matter said last week.

"Expectations for this company are sky high," Li Muzhi, a Hong Kong-based analyst at Arete Research Service, said on Monday by phone. "The market seems to be using Alibaba as a proxy for the macroeconomy and consumer economy."

The number of Chinese Internet users has grown to 632 million, greater than the population of any other country except India, and could exceed 850 million by 2015, government data show. Alibaba, led by billionaire chairman Jack Ma, surpassed Facebook by market capitalisation from the minute it started trading and closed with a valuation of US$231.4 billion, making it larger than Amazon.com and EBay combined.

Florence Shih, a Hong Kong-based spokeswoman for Alibaba, didn't immediately return a call seeking comment. The Wall Street Journal reported the company had exercised the greenshoe option, citing unidentified people.

McKinsey & Co predicts online commerce in the world's second-largest economy will reach US$395 billion next year, triple its 2011 level. Alibaba's retail platforms helped generate 6.1 billion package shipments in the 12 months ended June, accounting for 54 per cent of the nation's total, the company said in August.

The Chinese e-commerce company's sale, already the biggest in the US, surpassed Agricultural Bank of China's US$22.1 billion IPO in 2010 as the world's largest after the greenshoe was exercised, according to data compiled by Bloomberg.

Operating profit at Alibaba advanced to US$1.1 billion in the three months ended June, or 42 per cent more than the combined profit of Amazon and EBay for the period. Revenue rose 46 per cent in local currency to the equivalent of US$2.54 billion.

Since the start of 2012, Alibaba has announced US$16.1 billion of acquisitions as it expands into industries including film production, taxi-booking services and professional soccer, data compiled by Bloomberg show.

In May, Alibaba bought a 10 per cent stake in Singapore Post to develop its logistics in South-east Asia. It also invested in Youku Tudou, operator of China's biggest online video sites, and on July 15 announced plans for a streaming service with Lions Gate Entertainment Corp.

Before the greenshoe option was exercised, Alibaba was already the largest US IPO, ahead of Visa Inc's US$19.7 billion first-time share sale in 2008, data compiled by Bloomberg show. It was able to break the record with the support of large investors, as nearly half the shares were placed with just 25 funds, people with knowledge of the matter said last week.

Alibaba drew crowds of money managers to meetings held around the world as the company pitched itself this month to prospective shareholders. As many as 800 people turned up to the first event at New York's Waldorf Astoria hotel.

Mr Ma, who started Alibaba from his Hangzhou apartment in 1999 with US$60,000, watched his net worth swell to US$26.5 billion as the shares rose, according to the Bloomberg Billionaires Index. The 50-year-old former schoolteacher is China's richest man, trailing only Hong Kong property tycoon Li Ka-shing among Asian billionaires. - Bloomberg