Alibaba May Raise Price of IPO

Alibaba’s IPO has already been described as the largest in the world (maybe), and the largest in the United States, though that is less likely because of the size of Google Inc.’s (NASDAQ: GOOG) IPO. Demand is also great enough that many individual investors cannot get shares. As a matter of fact, according to CNBC, some of the largest U.S. investors may push to get what modest number of shares may be available:

Billionaire investor Leon Cooperman is one of Alibaba’s fans.

And:

Three other major hedge fund investors who have shown interest in the IPO are Dan Loeb of Third Point, David Tepper of Appaloosa Management and Dan Benton of Andor Capital Management.

The decision probably makes sense. Obviously, a higher price would yield more capital for the company. It also would help prove that Alibaba’s nearly mythical rise over the past decade to being the e-commerce engine of China was extraordinary as the company claims.

The Times reports:

A final decision will be made next Thursday, when underwriters are expected to price the offering after examining its order book. Alibaba would then begin trading the next day on the New York Stock Exchange

One of the reasons bankers may raise the price is that tech IPOs of the past year have routinely been underpriced, which has robbed companies of capital and caused huge surges in prices the first day of the IPOs. While the increases may be impressive, they are a sign of how poorly underwriters do when gauging demand.

Of course, the one risk of rains the Alibaba share prices have is that bankers have misjudged demand on the high side. If so, Alibaba’s shares could drop the first day and stay below the IPO price, as happened to Facebook (NASDAQ: FB).

READ ALSO: Strong Alibaba IPO Demand May Raise Price and Shares for Sale