The Alibaba.com offering was not registered with the U.S. Securities and Exchange Commission.
It is rather straightforward — there is a provision in the ‘33 Act that might make it illegal to offer unregistered stock to U.S. investors.
But there’s more.
Chinese Lesson
If you think you can buy Alibaba.com’s IPO when it starts trading on the Hong Kong Stock Exchange on or about Nov. 6, think again. There’s another provision that keeps the door closed to American investors.
There is a “hands off” time limit until an IPO becomes what is known as a “seasoned security.” Under the ‘33 Act, it could be about a 40-day wait, but you might wish to check with a securities lawyer.
Nevertheless, if you think you’ve heard the last of the Alibaba.com IPO –- wrong again. In the United States, an IPO is priced after the close of business one day and starts trading the next morning. Not so in China and Hong Kong.
When IPOs are to trade on the Shanghai and/or Hong Kong Stock Exchanges, the offering process takes a series of steps. First is the offering or solicitation date. About five days later is the closing date. The pricing date is either that day or the following. About five days later is the allocation date and the IPO starts trading the next day. From start to finish, it takes about two weeks for a Chinese-traded IPO to complete its offering cycle.
That is the case with Alibaba.com. Its offering date was on Tuesday, Oct. 23, according to published reports. The closing, pricing and allocation dates were unclear, but all seemed to be in agreement that the deal is to start trading on the Hong Kong Stock Exchange on Tuesday, Nov. 6.
Between now and then, the U.S. IPO market plans to set off a few Chinese fireworks for itself.
This week’s new-issue calendar lists 12 deals. And bankers expect to raise nearly $1.9 billion. If you think IPO traffic is on the upswing, you are right.
Consider this: Last month, in September, eight IPOs were priced that raised $1.6 billion, according to SEC filings.
This week’s spotlight will be on CNinsure (Nasdaq: CISG proposed) and Giant Interactive Group (NYSE: GA proposed).
CNinsure is an independent Chinese insurance agency and brokerage company with about 11,000 sales professionals and 171 sales and service outlets operating in eight provinces.
For the six months ended June 30, 2007, CNinsure reported net income of US$7.7 million on revenues of US$22.7 million, compared with net income of US$7.5 million on revenues of US$32.4 million for the year ended Dec. 31, 2006.
CNinsure plans to price 11.6 million shares at $11 to $13 each to raise $139.7 million, unless the offering terms get bumped higher.
Giant Interactive Group is a Shanghai-based online game developer and operator. The company believes its online game, ZT Online, was the most popular online game in China in 2006.
For the six months ended June 30, 2007, Giant Interactive reported net income of US$67.3 million on revenues of US$90.3 million, compared with net income of US$32.1 million on revenues of US$47.7 million for the year ended Dec. 31, 2006.
Giant Interactive plans to price 57.2 million shares at $12 to $14 each to raise $743.6 million, unless the offering terms get bumped higher.
Lucky Seven
Worth noting: Wall Street bankers have priced 161 new issues in 2007 (excluding 52 unit offerings). On Friday, Oct. 26, 100 closed above their initial offering prices. The average gain for all 161 was nearly 26 percent.
Seven of the top nine aftermarket performers were Chinese IPOs. The average gain for those seven was 189.4 percent.
It would look like this week’s Chinese IPOs could give Wall Street a little bottle rocket show ahead of Alibaba.com’s expected fireworks in Hong Kong the next week.