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Getting Ready for Alibaba’s Big IPO

Posted by Sun on October 22, 2007
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The first time I heard that Alibaba.com was planning for an initial share sale this year was in 2005 when Baidu.com went public. Since then, I have been following news about Alibaba.com’s initial public offering with a lot of interests because I knew I want a piece of it (maybe I should have bought some BIDU given the price of that stock today).

Early this month, Alibaba.com won regulatory approval to list shares on Hong Kong Stock Exchange and last week, the IPO date was finally settled on November 6th, under symbol 1688.HK. According to latest reports, Alibaba.com has just revised its price range from $HK10.00 – HK$12.00 to HK$12 to HK$13.50 a share due to strong demands. The IPO could bring Alibaba an estimated $1.5B, the second largest internet IPO in history only after Google’s $1.67 debut.

Alibaba.com is a e-commerce website that provides small buyers and suppliers sales leads from China and overseas for online trading. Currently, its online marketplaces have more than 24 million registered members.According to Bloomberg.com, Alibaba’s IPO will value the company at 54 times its estimated 2008 profit. For 2007, Alibaba.com forecasts $83M in revenues, nearly doubling the earnings from the previous year. Currently, Aliabab.com dominates a Chinese B2B market with a 69% share. Its closest rival, Global Sources, has 8.4% market share and is traded at 33 times estimated 2008 earning.

Two months ago, I opened a Global Trading Account at E-Trade. The main reason for having such an account is to trade mainland Chinese stocks that are only listed on HKSE. I have bought one stock already (Industrial & Commercial Bank of China (ICBC), purchased at HK$5.00, now traded around HK$6.50) and Alibaba.com’s IPO will be my next bet. To get myself ready for the IPO, I transferred $7,000 to my E-Trade account and hopefully I could buy about 2,000 to 3,000 shares when the stock begins trading on November 6. In the past, I have bought several Chinese IPO stocks on or a little after their IPOs on the secondary markets. There were some successes (LFC and EJ) and failures (GRRF and XFML). The reason I like Alibaba.com is its dominant position in the e-commerce business in China and growth potentials. And from what I have seen, going with the leaders is always profitable.

Following are some recent reports on Alibaba and its IPO.

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Categories : Investing, Stock

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9 Comments
October 23, 2007

Thank you for this post. It is really inspiring. Since you talked about the high cost to have E-trade Global Account, have you checked if you can open an account with a Chinese broker, e.g., Bank of China International, which may allow you trade in HK stock market and also offer lower fees?

Posted by Jade
October 23, 2007

Sun

Thank you for your excellent blog. Can you share your methodology on buying alibaba.com stocks when it IPO’s.
Do you have to do something special that day..like staying up late at night when the HK market opens etc etc. What price do you typically get the IPO etc?

Thanks

Saj

Posted by Saj
October 25, 2007

Hi,

I’d like to thank you for your post as well. I’ve been interested in this company since I heard about it during an ecommerce conference in China.

I would also like to know what you think is the best way to purchase shares during the IPO. You mention that the etrade account only allows limit orders, so I imagine you have to guess what will happen. Do you think the risk that you will be unable to purchase any shares at all is high? I am concerned that if you can’t purchase shares then you’d have to pay another fee and the cost of converting your funds back to USD.

Thanks.

Posted by David
October 26, 2007

From what I know, the stock will be available. It’s just a matter of when we can buy it and at what price level. According to the rule, we will have to wait 40 days before we can trade the stock after it goes on to the open exchange. Thus, I am not too worried that we can’t buy this stock. We can buy it, but the price after the 40-day period may not be favorable any more. But you never know.

Posted by Sun
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