Alibaba Opts for Greenshoe to Book Higher Proceeds
23 September 2014 16:16 WIB
TEMPO.CO, New York - After a US record-breaking IPO last Friday, Alibaba now aims for a world record. The Chinese e-commerce giant is set to take a green shoe option to obtain more proceeds.
A greenshoe option gives IPO underwriters the right to sell more shares to investors than originally planned by the issuer. This is normally done when the demand for a security issue proves higher than expected.
To the Financial Times, sources said Alibaba opted for a greenshoe mechanism after having been flooded with demands from investors. The high demand caused Alibaba's stock price to jump 38 percent from US$68 to US$93.89 per share.
Meanwhile, sources from Bloomberg said that there are several underwriters implementing the greenshoe option for Alibaba. They are namely Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, and Citigroup Inc.
Based on simulation results, Alibaba's IPO proceeds will increase from US$21.8 billion to US$25 billion once the greenshoe kicks in.
At the New York Stock Exchange, Alibaba broke the US record with a share price of US$99.7 moments after its IPO took off. At the close of trading, Alibaba reaped US$21.8 billion in proceeds, the biggest in the United States.
If the greenshoe target is achieved, Alibaba will be hold the world record for the largest IPO. Currently, the record belongs to Agricultural Bank of China Ltd. who scored an IPO proceed of US$22.1 billion in 2010.
FERY FIRMANSYAH | FERY FIRMANSYAH
