The Chinese Internet company Alibaba disclosed terms of its massive upcoming IPO, putting the wheels in motion for it to launch its “roadshow” next week and woo investors in a deal expected to start trading Sept. 19 or shortly thereafter. After much anticipation, Alibaba Friday filed with the Securities and Exchange Commission its prospectus giving investors the first look at the company’s valuation and expected price range for its shares.
Alibaba is expected to raise more than $20 billion making it the biggest U.S. ever, says Renaissance Capital, the IPO exchange-traded fund manager. This is just the first in what will be a number of steps before the stock actually starts to trade. Now that the initial deal terms are set, it usually takes two to three weeks afterwards for trading to begin, which would put the launch of trading as early as Sept. 19 but as late as the week of Sept. 22, Renaissance says.
The initial price range of the shares will be set between $60 and $66 a share, according to thefiling. Including stock sold by insiders, Alibaba is to sell 320.1 million shares. That means $20.1 billion will be raised from the offering. The company itself is selling 123 million shares. The initial price range of an IPO can be adjusted higher or lower as market conditions change and investment bankers have an opportunity to measure investor interest.
The company says it will have roughly 2.5 billion shares outstanding following the IPO, including shares issued in connection to options and restricted stock units. That means the company would have roughly a $160 billion valuation at the midpoint of the IPO offering range. At that valuation, the company would be the 24th most valuable company in the Standard & Poor’s 500, just behind Bank of America at $161 billion and ahead of Amazon.com at $159 billion.
Big insiders and investors will also be selling in the deal. Struggling online portal Yahoo (YHOO), which was an early investor in Alibaba, plans to sell 121 million of its 524 million shares in the deal. That would raise $7.6 billion for the company, a tidal-sized cash infusion for the company which has $2.7 billion in cash and equivalents. The value of Yahoo’s 524 million Alibaba shares is $33 billion, which is 84% of Yahoo’s total market value of $39 billion.