The e-commerce giant's shares will likely be priced at 176 Hong Kong dollars ($22.48), the source said. That is just less than a 3% discount to the U.S. closing price. One U.S.-listed ADS, or American Depository Share, is equal to eight ordinary shares.
That would make the listing the world's biggest so far in 2019.
The retail portion of the secondary listing has not been priced yet, but that is expected on Wednesday. Retail shares are "likely to be priced around the same level" as the institutional portion, the source told CNBC.
Alibaba got the green light from Hong Kong regulators for the secondary listing last week, CNBC previously reported.
The Chinese e-commerce giant will issue 500 million new ordinary shares plus 75 million "greenshoe" options. The latter give the underwriting banks the ability to sell more shares than the original amount set.
Of those 500 million shares, 50 million will be reserved for retail investors, the source told CNBC.
The company previously said those retail shares will be priced at no more than 188 Hong Kong dollars (about $24.01).
At 176 Hong Kong dollars, the secondary listing in Hong Kong will raise $12.9 billion, if the greenshoe option is exercised. That would make it the biggest fundraising event of the year so far.
However, the Alibaba listing will likely be exceeded in size by Saudi Aramco's listing in Riyadh, anticipated in December.
So far, demand has looked strong. Alibaba closed its order books for institutional investors earlier than expected, CNBC reported on Tuesday.
Shares of Alibaba will begin trading on Nov. 26 in Hong Kong.