Alibaba Not Eligible for S&P 500, S&P Says Citing China Domicile

If anyone was wondering if Alibaba Group Holding Ltd. was going into the Standard & Poor’s 500 Index, the answer is no.

“Alibaba is not eligible to be on the S&P 500 because it is not a U.S. company,” according to a statement from David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices.

The company will be assigned a China domicile and included in indexes that track the nation’s shares, based on a press release from New York-based S&P. More than $5.1 trillion in assets are benchmarked to the performance of the S&P 500, according to the company’s website.

Alibaba is seeking a valuation of as much as $162.7 billion, larger than 95 percent of the S&P 500, as it enters the IPO’s final stages. At the high end of the proposed price range, Alibaba would be the third most valuable Internet company traded in the U.S. after Google Inc. and Facebook Inc. The offering could raise as much as $21.1 billion, according to a Sept. 5 regulatory filing.

“There may be some temporary wave of enthusiasm toward some of the emerging-market managed funds and ETFs that include Alibaba, but if you look beyond the short-term, it won’t make a difference,” Marshall Front, chief investment officer at Chicago-based Front Barnett Associates LLC, said via phone. “Retail investors looking for a pure play will have to take their chances in the IPO market or wait until trading to try and buy it.”

Global Roadshow

Alibaba’s executives are in the middle of a 10-day global roadshow to meet potential investors. The first two events this week, in New York and Boston, drew as many as a thousand people.

In March, the company announced plans to go public, and settled on New York as the venue for its IPO after Hong Kong regulators refused to approve its proposed governance structure, which would allow its partners to nominate a majority of its board.

Separately, MSCI Inc. said in a press release last week that it’s consulting with investors to change certain rules for its equity benchmarks.

MSCI proposed adding companies that are not listed in their home country to its market indexes. Baidu Inc. and VimpelCom Ltd. are currently excluded from MSCI’s index universe because they are based in China and Russia and listed in the U.S. Alibaba is in a similar situation because it will trade on American exchanges and is based in Hangzhou, China.