Evaluation of Alibaba IPO: Advantages, Disadvantages, and Performance

Running head: IPO
IPO
Zaidoon Barham
THE UNIVERSITY OF MANCHESTER ALLIANCE MANCHESTER BUSINESS SCHOOL
Student ID10314087

1IPO
Executive summary
Main purpose of the report is to evaluate the IPO issued by Alibaba. In the 1st part of the report
the advantages and disadvantages associated with going public will be discussed along with the
motivation behind Alibaba going public. Further, in the next part the report will focus on why it
is easier comparatively for Alibaba to raise the funds through stock market rather than debt.The
report will also highlight the issues for the new investors regarding VIE applied by the entity.
The report will also analyse the share price at which the IPO issued and will focus on the long
term as well as short performance of the IPO issued by Alibaba.

2IPO
Table of Contents
Answer (i)........................................................................................................................................3
(a) Benefits and drawback of going public.............................................................................3
(b) Motivation behind Alibaba going public..........................................................................3
Answer (ii).......................................................................................................................................4
Answers (iii)....................................................................................................................................5
Answer (iv)......................................................................................................................................6
Answer (v).......................................................................................................................................7
Answer (vi)......................................................................................................................................8
(a) Key tasks executed by underwriter...................................................................................8
(b) Primary considerations for selecting underwriter.............................................................8
(c) Main motivation for syndication.......................................................................................9
Answer (vii).....................................................................................................................................9
Answer (viii)..................................................................................................................................10
(i) Performance comparison in short term...........................................................................10
(ii) Performance comparison in short term...........................................................................10
Answers (ix)...................................................................................................................................11
Conclusion.....................................................................................................................................11
Reference.......................................................................................................................................12

3IPO
Answer (i)
(a) Benefits and drawback of going public
A company should plan out well before going public. This will help them to sustain less
loss if the IPO does not work properly. The companies aspire to expand more and make their
business more fruitful, Therefore, the company usually go for initial public offering (IPO). The
major benefit which the company enjoys is the benefit of raising capital from the market
(Havinga, Hoving and Swagemakers 2016). The capital collected from the market can be used
for investing in the research and development department of the company. Furthermore, the
accumulated capital collected from the market helps the company to fund the capital expenditure.
The company may also use the capital to pay off its debt. IPO are also seen as the generating new
customer group for the company because when the company go for listing with the stock
exchange then the company become more popular among the investors and hence creating a new
market avenue for the company. These phenomena also help the company to increase its market
share. The main disadvantage which prevails under the sheds of the advantage of the IPO is
generally the cost as the company needs to pay a considerable amount of money for financial
reporting document, audit fees and many more cost related with the IPO (Alibabagroup.com
2019). This helps to create a difficult situation for smaller companies who want to expand by
becoming public. The company becoming public creates a risk since the autonomy of the public
company is less in comparison to the private company.
(b) Motivation behind Alibaba going public
The reason behind Alibaba IPO in USA is that the Alibaba Group will have a complete
control in the company in terms of percentage of shares in USA based subsidiary of Alibaba.
Before the IPO the founders of the company did not possess control in terms of percentage of