Selective Allocations Help Alibaba Group Holding Ltd (BABA) Achieve Record

Alibaba Group Holding Ltd (NYSE:BABA)’s IPO not only achieved the record standard that it seemed on the verge of achieving in the U.S, it shattered it and set a new global high in the process, surpassing $25 billion. The record-setting opening was discussed by Jim Cramer and David Faber on CNBC this morning, who revealed that there was far more intricacy behind the launch that led to its record opening. 1

“Alibaba now ranks officially as the biggest IPO ever, surpassing $25 billion. This after the underwriters exercised an option to purchase an additional 48 million shares from Alibaba; it’s called ‘the green shoe’ […]. The Chinese e-commerce giant surged in its Wall Street debut on Friday. The shares were up 38% above where the stock was priced at $68. It was stunning,” Faber said.

As Cramer and Faber discussed, there was a lot more to the IPO than just the brawn of Alibaba Group Holding Ltd (NYSE:BABA)’s rapidly growing, high-margin business in China; there was in fact a good deal of brains behind the launch as well, with Alibaba Group Holding Ltd (NYSE:BABA) exhibiting a sophisticated knowledge and understanding of Wall Street in how they vetted each of the 1,700 allocations.

In particular, it was reported by CNBC that numerous hedge funds were allocated miniscule amounts of Alibaba Group Holding Ltd (NYSE:BABA) stock in comparison to the amount requested. Instead, preferential treatment seems to have been given to investors that had longer ties with the company, including early backers, who were given larger dollops of shares as a reward.

The previous global IPO record was held by The Agricultural Bank of China, which raised $22.11 billion in 2010 with its IPO in Hong Kong and Shanghai. Visa Inc (NYSE:V)’s record U.S IPO in New York in 2008 pulled in $19.65 billion.

Alibaba Group Holding Ltd (NYSE:BABA) is giving back some of those big gains from Friday in today’s trading thus far. They are down 4.5% in midday trading on the NYSE.

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