You are here: Home » International » News » Companies
Business Standard

Banks will get just a sliver of Alibaba's $11.2 billion share sale

The average fee earned on the 10 largest listings in Hong Kong is 1.76%

Julia Fioretti | Bloomberg 

Photo: Bloomberg
Photo: Bloomberg

Group Holding Ltd.’s $11.2 billion Hong Kong share sale may be set to swell the tech giant’s cash pile but the banks are getting just a tiny percentage of that.

will pay the banks that underwrote the listing $28.1 million, representing just 0.25% of the deal value, according to the prospectus lodged with the U.S. Securities and Exchange Commission. That is the lowest fee in percentage terms paid to banks out of the 10 largest listings in Hong Kong, data compiled by Bloomberg show. could pay them as much as $32.3 million if an over-allotment option of 75 million shares is exercised in full.

Credit Suisse Group AG and China Capital Corp. were the joint sponsors of the share sale. Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley were joint global coordinators.

The average fee earned on the 10 largest listings in Hong Kong is 1.76%, with the highest being the 2.5% paid by the likes of Bank of China Ltd. and China Construction Bank Corp. Budweiser Brewing Company APAC Ltd. -- which completed Hong Kong’s second-biggest listing this year after Alibaba -- paid its banks 1.5% of the IPO proceeds.

Issuers typically pay banks about 2% to 3% of the proceeds for initial public offerings in Hong Kong, the bulk of which goes to the sponsors. Banks also split the 1% brokerage fee paid by investors. The average percentage fee for listings in Hong Kong this year is 4.5%, data compiled by Bloomberg show.

Alibaba’s listing is the largest equity offering in the financial hub since 2010, making it a particularly coveted deal for investment banks, who have seen fees compressed as competition increases.

Despite the small percentage the Alibaba fee represents, the $28.1 million is still good money for the banks in a year where until recently IPO volumes in Hong Kong were down some 40% from a year earlier. The banks will also take home the 1% brokerage fee, bringing their total compensation to 1.25% of the proceeds, or about $140 million.

However, it is a far cry from the $300 million banks earned for working on Alibaba’s $25 billion New York IPO in 2014, although that would have required a lot more work as investors were less familiar with the company.

CICC was allocated the largest number of Alibaba shares to underwrite -- 160 million -- followed by Credit Suisse, which underwrote 127.5 million, the prospectus shows. In it, Alibaba said it would pay HK$0.44 per share in underwriting fees.

Banks will get just a sliver of Alibaba's $11.2 billion share sale


Alibaba Group Holding

Hong Kong exchange

Size about $11b

Pricing Nov. 20; listing Nov. 26

Credit Suisse, CICC

Postal Savings Bank of China

Shanghai exchange

Size $4.1b

Taking orders Nov. 28

Citic Securities, CICC, China Post Securities, UBS Securities

China Zheshang Bank

Shanghai exchange

Size $1.9b

Took orders Nov. 14; listing date TBA

Citic Securities

Pharmaron Beijing

Hong Kong exchange

Size up to $588m

Pricing Nov. 21; Listing Nov. 28

CLSA, Goldman Sachs, Orient Capital

Venus Medtech

Hong Kong exchange

Size up to $400m

PDIE Nov. 11-22

Goldman Sachs, CICC, Credit Suisse, China Merchants Securities

China Merchants Commercial Reit

Hong Kong exchange

Size about $400m

Started gauging demand Nov. 14; listing date TBA


Alphamab Oncology

Hong Kong exchange

Size $200m-$300m

Started gauging demand Nov. 18

Morgan Stanley, Jefferies, CLSA

Bangkok Commercial Asset Management

Thailand stock exchange

Size up to $1.16b

Taking orders from Nov. 25-29, listing date TBA

Trinity Securities, Kasikorn Securities

Longyan Zhuoyue New Energy

Shanghai Star board

Size $191m

Took orders Nov. 11; listing date TBA

Yingda Securities

The Essel Group plans to sell a stake in Zee Entertainment Enterprises Ltd., India’s largest publicly-traded television network, as the media conglomerate struggles to pare debt.

Bang Qi Jian Ltd. sells 20 million Ping An Good Doctor shares.

Canaan Inc., a maker of Bitcoin mining machines, raised $90 million after pricing its U.S. initial public offering at the bottom of its marketed range.

Pharmaron Beijing plans to price its Hong Kong initial public offering at the top of the price range to raise HK$4.6b, IFR reports, citing unidentified people close to the deal.

First Published: Thu, November 21 2019. 23:53 IST