Alibaba Said to Push Back IPO to September Amid SEC Review

Alibaba Chairman Jack Ma
Jack Ma, chairman of Alibaba Group Holding Ltd. The company may price its IPO about 22 percent below analyst valuations, according to a survey of estimates, a move that could avoid repeating the listing flop of Facebook Inc. Photographer: Kiyoshi Ota/Bloomberg

Alibaba Group Holding Ltd. will wait until September to conduct its U.S. initial public offering, a person with knowledge of the matter said, as it seeks regulatory approval of its prospectus.

The Chinese e-commerce giant had been targeting an early August debut that would have had its executives on the road to meet investors as soon as this month, people familiar with the situation said as recently as July 16. The company is now seeking to avoid rushing the deal as it continues talks with the U.S. Securities and Exchange Commission, the person said, asking not to be identified because the process remains private.

Alibaba’s been on an acquisition spree -- adding stakes in logistics, media, and retail companies, that may be slowing down the approval process, said Max Wolff, an independent analyst who has been following Alibaba closely. Regulators have also had to consider Alibaba’s unique governance model and that -- like other Chinese Internet companies -- it relies on a legal structure that could potentially be invalidated.

“It was probably do-able to get it out in August, but ambitious,” Wolff said. “They have been on an acquisition superstreak. That’s much less positive for speed.”

Pricing Discount

The company may price its IPO about 22 percent below analyst valuations, according to a survey of estimates, a move that could avoid repeating the listing flop of Facebook Inc. The Hangzhou-based company may set the IPO value at $154 billion, according to the average estimate of five analysts surveyed by Bloomberg.

Those same analysts see the company’s post-listing valuation as $198 billion.

Alibaba was expecting to receive another round of comments from the SEC by July 25, and planned to proceed with the roadshow shortly thereafter, a person said this week. The delay doesn’t reflect any problems with the SEC’s review process, the person familiar with the latest developments said yesterday.

The mostly minor revisions made to Alibaba’s offering document so far are a sign that the SEC -- the principal regulatory hurdle Alibaba must clear before raising perhaps $20 billion -- will approve the sale. Alibaba has amended its prospectus three times since it was first filed in May.

Ashley Zandy, a spokeswoman for Alibaba, declined to comment on the IPO process. Florence Shih, a Hong Kong-based spokeswoman for Alibaba, declined to comment on the analyst estimates.

Legal Structure

Alibaba’s IPO may be the biggest in U.S. history when it lists on the New York Stock Exchange as the company attracts investors keen to tap into the surging Chinese economy and the world’s biggest pool of Internet users.

The most recent amendment gave a partnership of 27 executives that governs Alibaba a stronger grip over the company, allowing it in certain cases to appoint directors without seeking shareholder approval. The partnership, a governance structure that kept Alibaba from pursuing a listing in Hong Kong, has the exclusive right to nominate a majority of Alibaba’s board.

Like many Chinese companies, Alibaba uses a legal structure known as a variable interest entity, or VIE, to get around Chinese government restrictions on foreign investment in certain industries, including Internet companies. While Alibaba gets less than 12 percent of its revenue from the structures, U.S. investors could be affected if Chinese courts fail to uphold the validity of the VIE contracts, the filing shows.

Summer Lull

Alibaba’s goal had been to get a deal done before a summer lull that begins in August, when many fund managers leave for vacations and trading volumes in the U.S. slump. To complete the deal in that short timeframe, Alibaba had discussed the option of dividing its management team up in order to conduct simultaneous investor meetings across the globe, two people said. That was one of several options on the table, they said.

Alibaba has been in the spotlight for months, as investors see it as a proxy for the rise of Web commerce in China. Estimates of Alibaba’s valuation suggest it could raise more than $20 billion through the IPO, which would make it the largest ever to list in the U.S. The offering will give Yahoo! Inc. -- which owns a 23 percent stake of Alibaba -- the ability to exit part of its investment.

Strategists are forecasting that gains in U.S. markets are done for the year. U.S. stocks slid from record highs last week, sending the Standard & Poor’s 500 Index to the biggest drop since April, amid concern over financial stress in Europe and the timing of higher U.S. interest rates.

The updated roadshow timeline was reported earlier by the New York Times.

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