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To IPO or not to IPO?

September 26, 2013

Two IPO stories that have been announced during the last week might have flown below the radar in the face of more U.S. centric news – J.P. Morgan and SAC facing multi-billion fines, the debt ceiling, and Amazon’s launch of its newest tablet offerings. While these are all worthy of paying attention (if requests come in, even worthy of their own blog posts), I believe that these IPO stories are interesting because it gives an inside viewing of the how’s and why’s of the IPO process.

Chrysler has not been publicly listed since the late 1990s, but, with JP Morgan as the lead underwriter the firm has announced plans to go public. A corporate roadshow is imminent, and all of the finance jockeys employed by the bank are hammering away at spreadsheets much like auto workers hammer away at the Chrysler vehicles. Looks like a fairly straight forward IPO, correct? Not so fast. The UAW workers, will are, for all intents and purposes be funding this IPO with their VEBA shares and so obviously want to see the highest valuation possible. Fiat, the European automaker that owns a majority share in Chrysler and would like to purchase the 41% it does not already own. Fiat would like to leverage the Jeep brand, as well as the cash raised via the IPO, to expand its operations in overseas as well as North America. For Fiat, the lower the IPO price, the lower the cost of this acquisition.

An interesting turn of events – two parties who engaged in the same IPO process, but do not want the same price point.

Alibaba, the Chinese e-commerce giant has cancelled their plans for a Hong Kong IPO and announced that it will be looking to file its multi-billion IPO on a U.S. market. This is a blow to the reputation of the Hong Kong exchanges, which was the top market globally for new share offerings from 2009 – 2011. The primary reason that drove this exodus from Hong Kong and into the U.S. was a relatively simple one: in the U.S. “dual class” shareholders structures are allowed but Hong Kong does not allow this practice. The New York Times, Google, and Facebook are just a handful of the well known firm that have dual class structures and that are listed in the U.S.

What makes this story interesting is that Alibaba is not actually seeking to file as a dual class firm in the U.S. According to the firm, it merely wants the current 28 partner management committee to be able to continue exercising control over the firm’s management and operations.

Interesting indeed.

Happy Reading


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