With the Alibaba roadshow kicking off this week, ConvergEx’s Nick Colas reviews the second-order implications of this historic transaction. Over the next two weeks investors will have to consider important issues, such as which stocks money managers will sell to fund their BABA purchase and what securities (stocks and ETFs) hedge funds may short to pair against an Alibaba long position. And consider: “Do big IPOs signal a market top?” Also, with an estimated $7 billion in fresh cash and a valuable public stock post-IPO, BABA will also be able to play the M&A game aggressively. Just consider its corporate North Star: “Our mission is to make it easy to do business anywhere” (the first line of the S-1 summary). In short, Colas concludes Alibaba really is a big deal (at 27.3x trailing EV/EBITDA).
Via ConvergEx’s Nick Colas,
Some 22 years ago I stood on the floor of the New York Stock Exchange with the management of the first Chinese company to come public in the U. S. Brilliance China Automotive made minivans in Shenyang under license from Toyota as well as producing its own somewhat older designs. The initial public offering was for shares in a Bermuda based holding company that owned shares in a Hong Kong business which in turned owned a piece of a charitable trust that held stock in the auto business. Despite that complexity, the allure of owning a piece of the Chinese car market generated tremendous investor interest. The IPO priced at $16, the first trade went off at $20, and the stock eventually doubled.
This post was published at Zero Hedge on 09/08/2014.
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