Alibaba Had Some People Over for Lunch

A thing that Alibaba did today was convince something like 800 people show up at the Waldorf and stand in a huge line to ride an elevator to eat a boxed lunch and listen to Alibaba tell them to buy its stock. One conclusion you could draw from this is that Alibaba's initial public offering is underpriced. The preliminary price range on Alibaba's offering is $60 to $66 per share, and at that price range the demand seems to exceed the elevators. So make the shares more expensive! Capitalism 101 people.

But this is probably misleading. If you're standing in line for this lunch, it's probably because you're not big enough to rate a one-on-one meeting with one of Alibaba's two traveling color-coded management teams over the next 10 days. And those big meetings are the focus, since Alibaba is in the business of raising a comically large amount of money. At the high end of the $60-$66 range, it's looking for some $21 billion, but you can't just sell $21 billion of stock into $21 billion of demand and call it a day. If you figure Alibaba's bankers won't feel good unless then can get at least three times as many orders as they have shares,1 then Alibaba will need to convince people to buy $63 billion of stock. That's more than all U.S.-listed IPOs so far this year, combined.2