This market is complex. While the S&P 500 Index still is higher YTD, the readings of investors according to the CNN fear and greed index are leaning strongly to the fear side. In this market environment, an IPO was announced yesterday for Chinese e-commerce goliath Alibaba. The largest IPO in US history occurred when Visa came public in 2008. The value of the capital raised was $17.8 billion according to Bloomberg at its ultimate offer price of $44 dollars.
Very few details are known at this point about Alibaba which is a company many in the U.S. hadn’t even heard of. The symbol or listing exchange have not yet been disclosed. Nor has the final amount of the offering which currently has a $1 billion dollar placeholder in yesterday’s announcement.
Alibaba would crack the top ten in terms of size of IPO if, as expected, the final size grows to over $5.5 billion. Yahoo bought 40% of the company 10 years ago and still owns a 22.6% stake. It’s fair to believe that Yahoo shares appreciated near the end of 2013 as investors apparently sought to purchase this hidden value. Yahoo has stated they plan to use the IPO to sell 10% of their stake in the company.
What will investor appetite be for the world’s largest e-commerce company? It is estimated that 46% of the Chinese population used the internet in 2013. That percentage is expected to continue to rise in the most populated country in the world.
Will this lead to the first 20 billion dollar IPO? Will investors look at this offering with fear or greed?
Note: OptionsHouse is not an underwriter in this or any IPO and has no inventory of shares at the IPO price. Once the shares are listed and open on the yet to be determined exchange traders will be able to trade the shares. Typically there is extreme volatility to newly listed shares and prices can fluctuate wildly. Execution times can also be delayed due to heavy volumes. Using limit orders is recommended.
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