Alibaba bets pay off for private equity

Shares in the $168bn Chinese e-commerce giant will start trading at $68 on Friday

Private equity-backed Alibaba Group, the e-commerce firm owned by Chinese business tycoon Jack Ma, has priced its initial public offering at the top of its range at $68 per share, with the business coming to market at the start of trading on Friday in New York, according to information on the New York Stock Exchange.

The long-awaited IPO will raise at least $21.8 billion and values the entire business at $168 billion.

Alibaba’s successful listing is welcome news for its private equity backers, some of which may choose to exit their stakes after the IPO.

The firm counts among its investors China Investment Corporation, Boyu Capital and CITIC Capital, as well as CDB Capital, the equity investment arm of China Development Bank, Silver Lake Partners, General Atlantic, Temasek and the Canada Pension Plan Investment Board (CPPIB). 

CPPIB has not disclosed the plans for its interest in the business, but the firm holds stakes through two direct investments worth $136 million, as well as its commitment to Silver Lake’s third private equity vehicle. Silver Lake, DST Global and Temasek together bought $1.6 billion worth of Alibaba shares in 2011, while General Atlantic has been an investor since 2009.

While not all the investors have disclosed their plans post-IPO, Boyu, co-founded by former TPG Capital partner Mary Ma, said late last year it planned to exit some of its holding through the Alibaba IPO when it happens.

Boyu plans to sell a 0.1 percent stake in the business, leaving it with a 0.5 percent stake, returning $86.9 million to the firm, according to company filings compiled by the Wall Street Journal.

CIC will be selling 0.7 percent, Yunfeng – Jack Ma’s own private equity fund – will sell 0.4 percent and Silver Lake 0.3 percent, the proceeds of which will be $971.4 million, $443.9 million and $278.8 million respectively.

The listing of Alibaba has been watched closely by investors around the world as the firm, originally planning to list in Hong Kong, said it would take the IPO to New York as Hong Kong regulators denied its request to retain a partnership structure, where management would control the board despite holding a minority of shares in the company – something not allowed in Hong Kong-listed companies.

After an influx of questions surrounding Alibaba’s decision to move the listing to the US, the Hong Kong Stock Exchange later revised its listing rules to become faster and transparent, a move to increase its competitiveness internationally.