Alibaba set to price IPO shares amid investor frenzy

By Liana B. Baker, Jessica Toonkel and Deepa Seetharaman

REUTERS - Underwriters for Alibaba Group Holdings are planning to allocate the bulk of the heavily anticipated offering from the Chinese e-commerce company to a group of 25 to 50 large institutions when pricing is completed after the close of trading Thursday, people familiar with the situation said.

By focusing the allocation so narrowly to large institutions, the banks hope to prevent volatile trading of its shares after expected trading begins Friday and in the weeks to come, the sources said.

The company is set to sell about $22 billion of shares on Thursday after the close of trading in what is expected to be one of the year's hottest sales. It will trade on the New York Stock Exchange under the ticker "BABA".

Alibaba, which handles more transactions than Amazon.com Inc and eBay Inc combined, is expected to price within the $66 to $68 per American depository share range, according to CNBC and an investor source. The final price has not yet been determined.

Multiple large institutions, including Blackrock, are angling for allocations of at least $1 billion in shares, according to the sources.

"For this kind of large deal it's very common to allocate the bulk of shares to the large institutional who will hold it for the long run," said Josef Schuster, founder of Chicago-based IPOX Schuster LLC, which helps create index funds for IPOs.

Investors, keen to buy into China's rapid growth and evolving Internet sector, have been clamoring to get shares since top executives at Alibaba, including co-founder and executive chairman Jack Ma, kicked off the road show last week.

At the top end of its range, the IPO would raise almost $22 billion, but if underwriters exercise an option to sell more shares, Alibaba's market debut will top Agricultural Bank of China Ltd's record $22.1 billion listing in 2010.

Given the size of the offering and the interest it has attracted, the company may not be able to avoid volatile trading of its shares.

In a note Thursday, analysts at Morningstar said the shares are more fairly valued at $90 each.

(Reporting by Liana Baker, Jessica Toonkel and Deepa Seetharaman; Writing by David Gaffen; Editing by Bernard Orr)