Alibaba's bankers get more buck for their bang

[HONG KONG] Phalanxes of bankers have been enlisted around the world to sell a combined US$45 billion of stock in the year's three biggest equity deals. Alibaba's advisers come out ahead of those working for Uber Technologies and Saudi Aramco, at least when measured by return on effort.

The Chinese e-commerce giant said on Wednesday that it had sold US$11.2 billion worth of shares in Hong Kong. The sum could rise to US$12.9 if underwriters exercise an optional overallotment. Credit Suisse, China International Capital Corp and others will share a paltry fee pool of roughly US$30 million. That's about the same as it cost Alibaba for printing, legal, accounting and other expenses.

It's also a far cry from the US$300 million investment bankers pocketed for Alibaba's US$25 billion initial public offering in New York five years ago. Then again, the latest batch of shares practically sold itself. Hong Kong has been convulsing with violent street protests, and on the day of the pricing activists were still holed up in a big university. Despite being forced to conduct investor meetings by phone, the Alibaba issuance had more than enough orders after offering a modest 2.9 per cent discount to its American depositary receipts.

Uber's IPO in May generated a bigger payday. The 29 banks involved, led by Morgan Stanley, Goldman Sachs and Bank of America, collected US$106 million after finding buyers for US$8.1 billion of the ride-hailing company's equity. Smaller US deals can reap 7 per cent of the amount raised for the financiers; in this case Uber drove a 1.3 per cent bargain. The sale was no easy feat, judging by the huge selloff on the day of the debut, which suggests bankers raised as much as possible for their client.

For the year's biggest equity deal, Saudi Aramco, financial advisers will get the sad trombone. They have jeopardised their reputations working for a controversial client and busted their backsides, including being regularly beckoned to fly into a booze-free region on weekends. And for all the energy expended, some two dozen banks will earn fees as low as US$90 million on a US$26 billion IPO, for just a 0.35 per cent rate. That's not much buck for the bang.

Alibaba will raise as much as US$12.9 billion from a secondary listing in Hong Kong, after pricing shares at HK$176 each, a discount of 2.9 per cent to the closing price of its American depositary receipts.

The company will pay investment banking fees of US$28.1 million for the sale of 500 million shares, a sum that could rise to US$32.3 million if a so-called overallotment of an additional 75 million shares is issued, according to documents submitted to the US Securities and Exchange Commission.

China International Capital Corp and Credit Suisse led the deal. Citigroup, JPMorgan and Morgan Stanley served as joint global coordinators, while HSBC and Industrial and Commercial Bank of China were junior bookrunners.

REUTERS