Asian bankers bathe in Alibaba afterglow
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Asian bankers bathe in Alibaba afterglow

Alibaba lists on NYSE; deal might free up pipeline.


The fanfare around the listing of Chinese e-commerce firm, Alibaba Group, on the New York Stock Exchange was almost deafening in September. It was one of those rare listings that was big enough to transcend the markets and create interest outside of the financial community.

The story of Jack Ma and his company captured the imagination of people across the globe as both the story of an entrepreneur and as a larger representation of the growth of China itself. The publicity for the float ensured an intense clamour by investors to grab a piece of the action.

 It was a refreshing approach and very consistent with the
culture of the firm

Neil Kell

Alibaba opened for trading on NYSE on September 19 and the stock opened at $92.70, a landmark moment for the Chinese economy, as well as the investment banks running the flotation.

Deutsche Bank was one of the lead underwriters on the deal.

“The two main challenges were ensuring that the ethos and ideals of the company were well understood and helping investors understand the long term value drivers of the company,” says Joaquin Rodriguez-Torres, Deutsche Bank’s Asia head of technology, media and telecom banking and Asia head of consumer-retail banking. “This was a unique situation in that there are no perfect comparables for international investors to easily point to. Management did a terrific job in bridging these gaps.”

Issues addressed

“This was a deal where the company, syndicate and various advisors worked very well together and in-sync to address all key issues throughout the process,” adds Neil Kell, head of Asia equity capital markets at Deutsche Bank. “While naturally there were differences of opinion, we were able to find consensus and the deal benefited as a result. The company ultimately made their own decisions but relied on and valued advice. It was a refreshing approach and very consistent with the culture of the firm.”

Others that were part of the transaction pointed to the valuable experience of carrying out a transaction in the US market.

“It’s obviously a landmark transaction for global capital markets, let alone Asia,” says one banker who worked on the deal, who wished to remain anonymous. “It probably strengthens the hand of the banks that can execute in the US. Banks on the deal will be very much pushing in the US market now.”

However, big listings like Alibaba do not come along every day.

“Clearly there is a very strong track record now that deals can get done that are globally appealing,” says the banker. “But it may not open the floodgates for Asian issuers as this is a unique situation. The mega IPOs from China are pretty much over now. Most are now smaller deals coming out of China.”

Joaquin Rodriguez-Torres,
Deutsche Bank

The Alibaba flotation has been positive for Asian ECM, but the feeling also exists in some quarters that it has been hogging the limelight and possibly getting in the way of less high-profile deals.

“It’s nice to have it out of the way too. A lot of people were saying: ‘Let’s see how Alibaba does first’. It’s good for everything else that’s in the pipeline. It clears the floor for other deals to get some attention.”

There is also no doubt the listing was a mighty coup for NYSE and a missed opportunity for the Hong Kong Stock Exchange, but it may act as a spur to change for the HKSE.

“Hong Kong will be devastated, but New York allowed Alibaba to do it the way it wanted… Hong Kong has to have a very long think about how it does things,” says the banker. “I would be staggered if they are not thinking about how they can open Hong Kong up to dual classes of shares.”

Plus points

A second Hong Kong banker points out that the sector most likely played a large part in the selection of New York as a listing venue. The tradition for large technology IPOs in the US and the investor base’s understanding of these types of companies was a strong plus point for the US market.

“It seems that any big technology IPO will still prefer the US given the depth and breadth of investors there,” says the second banker. “The small ones may still choose Hong Kong. I think it just shows you follow the investors. For particular sectors, some markets are better than others. Hong Kong has traditionally been for companies with a Chinese angle. 

"Alibaba is a kind of special case. The founders and owners still wanted to control the company. It will be interesting to see if Hong Kong will continue to be as strict on that. There’s been a lot of focus on that deal but it was listed in the US. In terms of local investors, everyone was trying to get a piece of that, but largely they are technology investors.”

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