China's Alibaba to raise $1.5 billion through IPO

The operator of the largest business-to-business e-commerce company in China, Alibaba.com is all set to raise 11.6 billion Hong Kong dollars, or $1.5 billion through its initial public offering. Trading will begin in Hong Kong on November 6.

Alibaba.com, partly owned by Yahoo intends to sell shares for 12 dollars to 13.50 dollars apiece, 13 percent more than the initial range marketed to investors. The IPO will be co-managed by Goldman Sachs and Morgan Stanley. The company and its parent plan to sell a combined 858.9 million shares, or a 17 percent stake.

The institutional tranche takes up 85 percent of the total offer, with eight cornerstone investors taking up about US$295 million of shares. Yahoo has agreed to subscribe to about US$100 million of shares.

Alibaba.com is a Hangzhou-based e-commerce/e-auction company, founded in 1999 by Ma Yun (Jack Ma). He is currently the non-executive and chairman of the company and owns 189 million shares in the company. The company operates five e-commerce sub-companies: Alibaba.com, Alisoft, Yahoo! China, Taobao, and Alipay. Yahoo owns a 39 percent stake in Alibaba.com after swapping $1 billion and its China unit for the holding in 2005.

Cisco Systems, the largest maker of computer-networking equipment, will buy $20 million worth of shares in the IPO and Foxconn, a unit of Hon Hai Precision Industry, will acquire $35 million worth of Alibaba.com shares in the IPO. In its share sale document, Alibaba forecast profit of at least 622 million Yuan, $83 million, this year, up from 219.9 million Yuan last year.

Referring to the fact that there is a lot of interest in China and in Internet stocks, Edward Yu, the chief executive officer of research company Analysys International said, “More and more Chinese companies are beginning to see the Internet as a way to help grow their businesses, which will in turn help make Alibaba's services more popular."

The company intends to use the bulk of the proceeds from the IPO for strategic acquisitions, brand-building and business development to expand its member base.