Alibaba Group Holding Ltd. could set its initial public offering price $100 billion short of most analyst valuations to avoid a debacle similar to Facebook Inc.’s (NASDAQ:FB) listing in 2012.
Analysts polled by Bloomberg said the Chinese e-commerce giant may set its IPO value as low as $154 billion. That’s 40 percent short of the $254 billion post-IPO price that analyst Carlos Kirjner projected in April -- and he called that figure “conservative” in a note to clients.
The Alibaba IPO is likely to be one of the largest in history and is not expected to begin trading on the New York Stock Exchange until Sept. 1, according to the report. Alibaba, which earns money through advertisements and commissions on its family of sites, offers businesses similar to both Amazon.com Inc. (NASDAQ:AMZN) and eBay Inc. (NASDAQ:EBAY) in China, and serves the world's biggest pool of Internet users in a booming economy.
People familiar with the matter told Bloomberg that Alibaba will wait until September for the offering as it seeks regulatory approval. The company is expected to raise as much as $20 billion when it goes public. Facebook, which raised $16 billion in its IPO, was priced at $104 billion in 2012, and lost half its value following its IPO, over concerns with the slowing growth of its user base and mobile advertising strategy. While Facebook slowly recovered, again reaching its IPO price 15 months later, that flop is serving as a cautionary tale for Alibaba executives.
Alibaba's mobile use was up to 27.4 percent in the first three months of 2014, from 19.7 percent of the Chinese company's total transactions a year prior, according to its filing.