Essay on Alibaba IPO

Name: Yizhou Fang A13070682 Subject: Markets 6010-003 September 19, 2014 was a memorable day in Chinese public corporation history. Alibaba Group became a public company on that day when its shares began trading on the New York Stock Exchange in the largest initial public offering in U.S. history. As we know, Alibaba is an Internet Commerce giant in China. In order to grow international businesses and consumers and to improve the company’s ecosystem, the Executive Chairman of the company, Jack Ma, made a decision to list BABA at the NYSE rather than HKSE. Alibaba features an unusual corporate governance structure---“partnership”, a group of 27 insiders who will nominate a majority of board members. Jack Ma believes that this share structure, something that’s possible in New York, would allow him to keep effective control over Alibaba. However, Hong Kong’s Exchange does not allow any publicly listed company to have dual-class share structures. To get rid of the restrictions, Alibaba choose to list at the NYSE. What’s more, Alibaba Group is so confident in its numbers and willing to let the SEC p over them. Their strategies are to increase active buyers and wallet share, to expand categories and offerings and to develop cross-border commerce opportunities. This goal motivated the company to finish a great transformation in international market with the beginning in NYSE. Alibaba, the selling shareholders and the underwriters named below have entered into an underwriting agreement with respect to the ADSs being offered-------Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs (Asia) L.L.C., J.P. Morgan Securities LLC, Morgan Stanley & Co. International plc and Citigroup Global Markets Inc. are acting as joint bookrunners of this offering and as the representatives of the underwriters. The underwriters will guarantee to offer part of the ADSs directly to the public at the public offering price and part of the ADSs to certain dealers at a price that represents a concession not in excess of the initial public offering price. After the initial offering of the ADSs, the offering price and other selling terms may from time to time be varied by the underwriters. And the underwriting syndicate is try to place the stock with its clients. For Alibaba, both of the underwriters and the syndicate played important role in their list on NYSE. There are three fees associated with an IPO. First, the firm must consider the legal and administrative cost of making a new issue, including the cost of preparing registration statements and filing fees. Second, the firm should examine the underwriting commission, the gross spread between the offering price and what the firm receives per share, which goes to cover the underwriting, management, and selling fees on the issue. The third cost is any underpricing on the issue, which provides a windfall to the investors who get the stock at the offering price and sell it at the much higher market price. For Alibaba, the expenses related to this offering includes SEC registration fee, NYSE listing fee, financial industry regulatory authority filling fee, printing and engraving expenses, independent advisory fees, legal fees and accounting fees. When it comes to the development of the price for offering, the leader investment bank first needs to make relates to the size of the initial issue and the use of the proceeds. The next

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