Ali Starts Green Shoe Mechanism To Become The World'S Largest IPO

Recently, reporters from

It was learned that Alibaba group (BABA.NYSE) announced the launch of the "green shoe mechanism", that is, the underwriters of IPO have exercised the highest 15% excess allotment rights, which made Alibaba's financing amount to about $25 billion 30 million this time, exceeding the 22 billion 100 million US dollar financing of Agricultural Bank of China in 2010, becoming the largest IPO. in the world.

The so-called excess allotment right is the right of the issuer to grant the principal underwriter to sell the shares over 15% of the underwriting amount at the same issue price. The purpose is to balance the supply and demand of the market and stabilize the share price.

In 1965, the Boston green shoes company took the lead in adopting it.

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The first Financial Daily reporters learned from Alibaba officials that Alibaba's IPO underwriters have fully exercised over 15% of their allotment rights, and bought an additional 48015900 shares (about 48 million shares) of American Depositary Shares (ADS). Each share of ADS represents a common stock of the Alibaba group, which will be sold at the issuing price of $68 per share.

In these 48 million stocks, Alibaba group has issued 26 million 140 thousand shares, while the rest of the stock came from YAHOO, Ma Yun and Cai Chongxin.

Analysts told the "First Financial Daily" reporter, from the market's enthusiasm for Alibaba stock, underwriters launched the green shoe mechanism is expected.

In the case of large shareholders generally reluctant to sell, Alibaba needs to issue new shares to meet the requirements of public shareholding, while the sale of Ma Yun and Cai Chongxin can reduce the number of new shares issued, so as to ensure that the interests of the old shareholders are not too much diluted.

Alibaba is listed on the first day of its listing.

At the opening price of $92.7, the final closing price was $93.89, up 38% from the issue price.

For Alibaba listed underwriters, the implementation of the "green shoe mechanism" can help them gain extra profits by obtaining additional shares at the issuing price of $68.

AndrewFrank, an analyst at Gartner, thinks that from the success of Alibaba, Chinese companies have begun to challenge Silicon Valley. This indicates that the dream of Internet wealth and power is no longer confined to only a few small cities on the west coast of the United States. Alibaba may have a great impact on other assets in the United States.

During his IPO interview in New York, Ma Yun said that the main purpose of the financing will continue to be used by small businesses and consumers. On the one hand, it will help the development of e-commerce in rural areas. On the other hand, it will continue to work hard to internationalize the strategy and extend the ecosystem of Ali to overseas markets.