Alibaba Ups IPO Price Band to $66-$68 on Robust Demand

Alibaba Group Holding Ltd.'s amended filing with the U.S. Securities and Exchange Commission revealed that the company increased the price range of its pending Initial Public Offering IPO to $66–$68 from $60–$66 per share.

Per the filing, Alibaba is expected to offer about 123.1 million shares, while other selling shareholders will offer about 197 million shares, bringing the total to 320.1 million American depositary shares ADS. The Chinese e-Commerce company will price its shares on Sep 18 and begin trading on Sep 19 on the New York Stock Exchange (NYSE) under the “BABA” ticker.

The news comes on the heels of the overwhelming response from investors in New York and Boston. Alibaba received enough orders to cover the entire IPO after just two days of its roadshow. This strong interest of the investors in Alibaba shares led the company and its underwriters to boost the IPO price range.

At the higher-end of the new price band, Alibaba's IPO is likely to be the biggest ever, raising as much as $21.8 billion, exceeding the Facebook Inc. FB IPO in 2012 that raised about $16 billion.

Alibaba has chosen Barclays PLC BCS as the lead underwriter for its IPO. Furthermore, the company has already signed agreements with many large U.S. banks -- such as Credit Suisse Group CS, JP Morgan Chase JPM, Citigroup C, Morgan Stanley MS, Goldman Sachs GS and Deutsche Bank AG DB -- as underwriters. Usually, a couple of banks handle IPOs but Alibaba has contracted a lot more, which indicates how challenging the proceedings could be.

Reportedly, Alibaba, like other Chinese IPOs, will also hold a program where all employees and other insiders will have an option to purchase shares, before the stock actually debuts on the public market.

For most investors, it is no more a secret that Yahoo! YHOO owns only 22.4% stake in the company, while Japan's Softbank Corporation owns nearly 37%. However, most U.S. investors will find it easier to secure Yahoo! shares than those of Softbank. Yahoo! plans to reduce its stake to 16.3%, following the offering. The company plans to sell 121.7 million Alibaba shares in the upcoming IPO while retaining 401.8 million.

CEO Marissa Mayer looks forward to reaping the profits when Alibaba is available for trading. As analysts commend the terrific numbers reported by Alibaba-specific business, investors are already stocking up Yahoo! shares in hopes of gaining from the IPO.

Yahoo! currently has a Zacks Rank #5 (Strong Sell).

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