Companies Push Back IPO Plans Due to Mega Alibaba Share Launch
By Vittorio Hernandez | August 21, 2014 2:30 PM EST
Due to the sheer size of the initial public offering (IPO) of Chinese e-commerce giant Alibaba Group Holding (BABA) in New York in September, other companies planning public listing had postponed their launches.
Alibaba's logo is seen at its headquarters on the outskirts of Hangzhou, Zhejiang province April 23, 2014. Picture taken April 23, 2014. REUTERS/Chance Chan
Alibaba's IPO is expected to raise a record-breaking $20 billion fresh capital. Since most retail and institutional investors may likely be too focused on the Alibaba offer, other companies would rather give way and allow the period after Labour Day for investors to study the IPO, reports The Wall Street Journal.
The business daily identified the Royal Bank of Scotland Group and Citizens Financial Group as among the companies that deferred their IPOs to avoid clashing with the mega launch of Alibaba. It said the Citizens'IPO was originally slated on the second week of September, aiming to raise between $2.5 billion and $3 billion.
Also postponing its IPO is Wayfair LLC, an online retailer.
It would not only be investors who would be too preoccupied with Alibaba's public launch but also underwriters since some of those involved in the Alibaba IPO have also been tapped by Citizens. It includes the Goldman Sachs Group, JPMorgan Chase and Morgan Stanley.
Zachary Prensky, principal of Little Bear Investments based in New York, predicted that "Alibaba is going to get a lot of attention, and people will be distracted by it."
However, Nasdaq pointed out that Alibaba would also need to address some long-term and short-term challenges such as introducing itself to American investors since the company transacts mostly with Chinese buyers.
A mega IPO is one of the market conditions that experts say are some of the reasons why companies delay their IPOs. Unpreparedness is another.
This year, 2014, has actually been a very busy year for IPOs with over $46 billion raised from 202 IPOs, according to The Wall Street Journal.
IPOs are just one way that companies raise capital. They could eventually return to the public and raise more funds by selling more shares.
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