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As investors salivate, Alibaba may raise price of IPO

Andrew Harrer | Bloomberg | Getty Images

The Alibaba Group's initial public offering was long expected to be a blockbuster. But a flood of orders for shares in the Chinese e-commerce giant has proved stronger than expected.

Only five days into the company's global journey to promote itself to prospective buyers, its underwriters have told their sales staffs that they plan to close orders for the stock sale by Wednesday, people briefed on the matter said on Friday.

And with that intense interest — shown by the huge lines of investors who waited to spend even an hour with Alibaba's senior management — comes the possibility that the company's bankers may eventually raise the price range for the offering, pushing it past a fund-raising goal of $21.1 billion.

That could make Alibaba the biggest initial offering in history, surpassing the $22.1 billion that the Agricultural Bank of China raised four years ago. But the people briefed on the matter, who spoke on the condition of anonymity, cautioned that no plans had been set and that the price range might remain within the already disclosed $60 to $66 a share, which values the company at roughly $163 billion at the high end.

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A final decision will be made next Thursday, when underwriters are expected to price the offering after examining its order book. Alibaba would then begin trading the next day on the New York Stock Exchange.

Driving any possible bump in price is strong demand from investors eager to buy a piece of China's biggest e-commerce operator. Alibaba, which is an amalgam of eBay, Amazon and Google, has positioned itself as a gateway to a Chinese population that is increasingly and quickly going online to shop, reaping huge growth in profits and margins along the way.

The company's underwriters told their sales staffs on Friday that the stock offering was already oversubscribed, with "no sensitivity" to the existing price range. That suggests that the banks may feel comfortable raising the price of the offering, as happened in other big initial offerings like those of General Motors and Facebook.

But the banks are wary of pushing the price range too far, potentially scaring off investors, some of the people briefed on the matter said.

Since Alibaba began its roadshow on Monday, money managers ranging from huge mutual funds to big-name hedge funds have clamored for an audience with executives including the company's chairman and co-founder, Jack Ma. More than 800 people attended an invitation-only lunchtime presentation at the Waldorf-Astoria in Midtown Manhattan, with some others turned away for lack of space.

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Other presentations across the country this week were smaller but no less packed. A gathering with Fidelity Investments portfolio managers and executives in Boston on Tuesday, for example, drew more than 100 attendees, according to people at the event.

Many hedge fund magnates, including Daniel S. Loeb of Third Point, have sought out one-on-one meetings with the Chinese company's management, according to people with direct knowledge of the roadshow scheduling. But Alibaba's underwriters have allotted fewer than 40 of the roughly 100 planned meetings to individual firms.

Most of those meetings will go to the institutional investors considered crucial to the offering's success, including mutual fund giants like BlackRock and Fidelity and sovereign wealth funds in the Middle East and Asia.

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Still, prominent hedge fund managers have gotten an intimate audience with the company. Mr. Loeb and several other investors — including David A. Tepper of Appaloosa Management, Louis M. Bacon of Moore Capital Management and Chris Shumway of Shumway Capital — attended a private lunch with Alibaba executives on Wednesday, according to people with direct knowledge of the schedule.

Several of those investors, Mr. Loeb and Mr. Tepper among them, walked away with good impressions of the management team, some of these people said.

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Representatives of Alibaba and the hedge funds declined to comment or were not available for comment.

If any of these investors have not placed orders for shares in the company, they will have only a few more days to do so. In their communications to the sales staffs, the underwriters said that they would stop accepting orders from investors in the United States by Tuesday at 4 p.m. Asian investors have until 4 p.m. Hong Kong time on Wednesday to place their orders, while money managers in Europe have until the close of business in London on Wednesday to submit orders.

But investors who have not met with the company's executives — either in one-on-one gatherings or in small group sessions — by their region's deadlines will have extra time to file their purchase orders.