Business
Alibaba Seeks to Raise Up to $21.1 Billion in U.S. IPO
LAGOS-Alibaba Group Holding Ltd., the e-commerce company whose fortunes surged along with China’s economy, plans a historic U.S. initial public offering that may also claim the global record.
Alibaba is seeking a valuation of as much as $162.7 billion, larger than 95 percent of the Standard & Poor’s 500 Index, as it enters the IPO’s final stages. At the high end of the proposed price range, Alibaba would be the third most valuable Internet company traded in the U.S. after Google Inc. and Facebook Inc. The offering could raise as much as $21.1 billion, according to a Sept. 5 regulatory filing.
Even at the high end, the valuation falls below more optimistic estimates of Alibaba’s worth — analysts surveyed in July put its value at $187 billion, on average. That will give China’s largest e-commerce company room to raise the IPO price as it builds demand during meetings with fund managers, said Henry Guo, an analyst at JG Capital.
“This is below Wall Street’s expectations,” said Guo, who is based in San Francisco. “They prefer a smoother start so that they can push up the prices.”
Alibaba may temper its valuation, some analysts said in July, which could help it avoid the listing flop of Facebook. Those analysts forecast that Alibaba would value itself at about $154 billion, after applying a discount.
Facebook had a price tag of $104 billion at the time of its IPO in May 2012 and went on to lose half its market value as investors worried about slowing growth and the company’s mobile strategy. The stock has since recovered.
Leadership, Structure
While Alibaba’s IPO is coming amid growth in China’s e-commerce market, investors now must weigh the risks of buying shares in the Hangzhou-based company. The Internet behemoth, whose marketplaces are comparable to those of EBay Inc. (EBAY) and Amazon.com Inc., has a governance arrangement that keeps insiders in control as well as an ownership structure that could face objections from the Chinese government.
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Alibaba and selling stockholders — including Yahoo! Inc. (YHOO), which owns more than 22 percent of the company, Chairman Jack Ma and Vice Chairman Joe Tsai — plan to sell 320.1 million American depositary shares for $60 to $66 apiece, the filing shows. Those shares are equivalent to a 13 percent stake. The stock will be listed on the New York Stock Exchange under the symbol BABA.
“We believe one thing, today is difficult, tomorrow is more difficult, but the day after tomorrow is beautiful,” Ma said in the company’s presentation. “So we have to work very hard in order to survive the long journey.”
Tsai is selling 4.25 million shares, meaning he could make $280 million if the shares were priced at the top-end. Ma will sell 12.75 million shares, earning as much as $841 million.
Visa, AgBank
Alibaba’s sale could exceed Visa Inc.’s $19.7 billion IPO in 2008, the biggest U.S. initial offering to date. Including an overallotment option, Alibaba could raise as much as $24.3 billion, surpassing the existing global record held by Agricultural Bank of China, which raised $22.1 billion in sales in both Hong Kong and Shanghai in 2010.
“This is their initial discussion of pricing, and then as the roadshow goes on and bankers build the books, they’ll have an idea about the interest level,” Eric Jackson, founder of Ironfire Capital LLC, said in a phone interview from Toronto.
The roadshow will begin tomorrow in New York, people with knowledge of the matter have said. After that, executives will travel to Boston and Baltimore, before heading west to San Francisco, the people said. The executives will then meet with investors in London and Hong Kong. Alibaba is scheduled to price its IPO on Sept. 18, according to data compiled by Bloomberg. The shares would start trading the next day.
Relative Value
Compared with other Internet companies, Alibaba is asking for a price that would make it expensive. At the high end of the IPO range, the company would debut at about 17 times sales in the year through June, well over the multiple of 1.96 times at Amazon and 3.92 times at EBay. Chinese Internet companies Tencent Holdings Ltd. and Baidu Inc. trade at 13.53 times and 12.24 times.
The valuation itself won’t stop investors who are drawn to Alibaba’s potential, Jackson said.
“In this environment, people want a growth story. People are willing to pay up for growth and Alibaba still has a lot of growth.”
Alibaba provides various marketplaces for buyers and sellers as well as services that help them conduct their businesses. Taobao Marketplace, started in 2003, enables millions of individuals and small businesses to sell products. Tmall.com provides a virtual shopping mall, with retailers and brands offering products, and Juhuasuan operates a flash-sales model. The three sites accounted for 82 percent of Alibaba’s sales in the year through March.
China E-Commerce
Mainland Internet users have grown to 632 million and could exceed 850 million by 2015, according to government data. Alibaba has been seen as a proxy for this growth with its 279 million active buyers in the year through June, according to its prospectus.
Alibaba “should be attractive to investors because of how exciting the Internet opportunities in China are and because that opportunity itself is not fully discovered,” said Gustavo Galindo, based in New York, who helps oversee more than $10 billion of emerging-market assets at Russell Investments.
Profit in the company’s first quarter surged as advertisers boosted spending on the Tmall and Taobao platforms, filings show. Net income almost tripled to $1.99 billion, or 84 cents a share, in the three months ended June 30, helped by a $1 billion gain on the revaluation of larger stakes acquired in UCWeb Inc. and OneTouch.
Value Swells
Alibaba was valued at just a few billion dollars when Yahoo acquired its stake in 2005, and rose to $32 billion after Silver Lake Management LLC, Temasek Holdings Pte and DST Global bought in six years later.
Yahoo’s valuation is partially pinned on its 22.4 percent stake in Alibaba, as shareholders speculate that the Sunnyvale, California-based company could use the proceeds from the IPO for large acquisitions or investments. In July, the company said it planned to keep a bigger stake in Alibaba post-IPO than it originally projected, and would return at least half of the cash it raises to shareholders.
Yahoo Stake
Yahoo plans to sell 121.7 million shares in the IPO, the filing shows, paring its stake to 16 percent after the offering. At the top of the marketed range, the company would reap more than $8 billion.
Ma will own 7.8 percent after the IPO, while Tsai will hold a 3.2 percent stake. SoftBank Corp., which holds a 34 percent stake in Alibaba, is not planning to sell shares.
Like many Chinese companies, Alibaba will rely on a legal structure known as a variable interest entity, or VIE, required by the Chinese government for foreign ownership of certain industries, including Internet companies.
According to a U.S. congressional commission report, shareholders face “major risks” from investing in companies that use a VIE. While Alibaba gets most of its revenue from wholly foreign-owned enterprises, if China revokes its VIE license, U.S. investors could be affected, filings show.
“They had to be conservative because the world hasn’t completely embraced the China model,” said Jeff Sica, president of Sica Wealth Management LLC in Morristown, New Jersey. “Despite this immense market, there’s still this concern that they exist in this mysterious black hole where shareholder value could evaporate.”
Partnership Structure
Alibaba’s partnership structure also raises some questions. It enables 27 individuals to nominate a majority of the board, which is then voted on by the shareholders — thus giving a select group outsize control of the company. That arrangement was rejected by Hong Kong regulators, so Alibaba chose a listing in the U.S. — where companies with different classes of shares, such as Facebook and Google, are common.
In a July 12 filing, Alibaba gave the partnership additional powers by saying it could appoint more directors without shareholder approval if fewer than a simple majority of the board are partnership nominees.
Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Citigroup Inc. are managing the offering. Simpson Thacher & Bartlett LLP and Sullivan & Cromwell LLP are providing legal advice. Rothschild is serving as the IPO adviser to Alibaba.
BLOOMBERG-
The Socio-Economic Rights and Accountability Project (SERAP) has taken legal action against the Federal Government of Nigeria (FGN) on what it termed “the arbitrary, unconstitutional, unlawful, unfair, and unreasonable 50 percent telecom tariff hike by the Nigerian Communications Commission (NCC).”
Biztellers reports that the NCC was joined in the suit as Defendant.
Recall that the NCC recently approved a 50 percent hike in telecom tariffs, which by implication would see the average price of calls will rise to N16.5 per minute from N11; the cost of 1GB of data to N431.25 from N287.5/GB; and SMS rates to N6 from N4.
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In the suit number FHC/ABJ/CS/111/2025 filed last Friday at the Federal High Court, Abuja, the SERAP is asking the court to determine “whether the unilateral decision by the NCC to authorise telcos to hike telecom tariffs by 50 percent is not arbitrary, unconstitutional, unlawful, unfair, unreasonable and inconsistent with citizens’ freedom of expression and access to information.”
In addition, the SERAP is asking the court for “a declaration that the unilateral decision by the NCC to authorise telcos to hike telecom tariff by 50 percent is arbitrary, unfair, unreasonable and inconsistent and incompatible with citizens’ freedom of expression and access to information, and therefore unconstitutional and unlawful.”
The SERAP is also seeking “an order of interim injunction restraining the NCC, its officers, agents, privies, assigns, or any other person or persons acting on its instructions from further implementing, enforcing and doing any act to give effect to the decision of the NCC authorizing telecom tariff hike by 50 percent.”
In the suit, the SERAP is arguing that: “The legal and constitutional provisions as well as international standards on freedom of expression and access to information constitute the repository of legality. The requirements of legality constrain the exercise of statutory powers by the NCC to authorise any increase in telecom tariffs.”
The suit filed on behalf of the SERAP by its lawyer Ebun-Olu Adegboruwa, SAN, read in part: “The demands of legality impose clear duties of fairness and reasonableness on the NCC in the exercise of its powers to authorize the telecom tariff hike by 50 percent, which is the subject-matter of this suit.
“The NCC is required under the legal provisions on consumers’ rights and constitutional and international standards on freedom of expression and access to information to base its decision on reasonable interpretations of its enabling statutes and guidelines and other relevant legal frameworks, and to follow due process.
“The exercise of the statutory powers of the NCC in approving the telecom tariff hike is a grave violation of the provisions of the Federal Competition and Consumer Protection Act 2018, the Nigerian Constitution 1999 [as amended] and the African Charter on Human and Peoples’ Rights to which Nigeria is a state party.
“These legal and constitutional provisions and international human rights standards recognize that every individual has the right to an equal opportunity to receive, seek and impart information through any communication medium without discrimination.
“The constitutional and democratic anomalies complained of by SERAP is more apparent when the said unilateral decision of the NCC approving a 50 percent increase in telecommunication tariffs is juxtaposed with the apparent procedural breaches of the condition-precedent for any approval of increase.
“The NCC is the statutory agency charged with the responsibility of promoting and implementing the national communications or telecommunications policy in Nigeria.
“The latest patently unconstitutional and unlawful increase in telecommunication tariffs is coming on the heels of a recent report by the National Bureau of Statistics (NBS), which shows that some 133 million Nigerians are poor.
“The NBS report also shows that over half of the population of Nigeria are multi-dimensionally poor and cook with dung, wood or charcoal, rather than cleaner energy.
“The increase in telecommunication tariffs is a fundamental breach of due process of law, as the purported approval by the NCC failed to meet the high threshold of consultation with key stakeholders, especially the Federal Competition and Consumer Protection Commission, which is the primary consumer protection agency in Nigeria.
“The increase in telecommunication tariffs is coming at a time when Nigerians are deeply burdened by the cost of living crisis. The cost of living crisis has resulted in low quality of life, unemployment and deaths, as many socially and economically vulnerable people scramble for free food in public and religious gatherings.
“The present-day economic realities in Nigeria include chronic poverty amongst a high percentage of citizens and the growing inability of several state governments to pay salary and pensions of workers, especially as the country still suffers from the removal of fuel subsidy, electricity tariff hike and inflated cost of food in the market.”
The SERAP is therefore asking the court for the following reliefs:
A DECLARATION that the unilateral decision of the NCC approving the increase of telecommunications tariff by 50 percent is arbitrary, unfair, unreasonable, and a deliberate attempt to stifle the constitutional and international human rights of citizens to freely express themselves and share information, and breach of sections 104 and 127 of the Federal Competition and Consumer Protection Act 2018, section 39 of the Constitution of the Federal Republic of Nigeria 1999 [as amended] and Article 9 of the African Charter on Human and Peoples’ Rights (Ratification and Enforcement) Act and Article 19 of the International Covenant on Civil and Political Rights to which Nigeria is a state party.
AN ORDER setting aside the unilateral decision of the NCC approving the increase of telecommunications tariff by 50 percent contained in a press statement published by the NCC on 20th January 2025 for being arbitrary, unfair, extortive, unreasonable, unconstitutional and a breach of the provisions of Sections 104 and 127 of the Federal Competition and Consumer Protection Act 2018, section 39 of the Constitution of the Federal Republic of Nigeria 1999 [as amended], Article 9 of the African Charter on Human and Peoples’ Rights (Ratification and Enforcement) Act and Article 19 of the International Covenant on Civil and Political Rights to which Nigeria is a state party.
AN ORDER restraining the NCC, its agents, assigns, privies and or representatives or such other persons acting on its behalf, and all telecommunication companies in Nigeria from implementing and/or enforcing the unilateral decision of the NCC approving the increase of telecommunications tariff by 50 percent as contained in a press statement published by the NCC on 20th January 2025.
AND FOR SUCH FURTHER ORDER(S) that the Honorable Court may deem fit to make in the circumstance of this suit.
No date has been fixed for the hearing of the interim application and the substantive suit.
Savannah Energy has shared a trading update on its Nigerian operations and other markets in Africa, including up-to-date cash collections in its Nigerian business.
According to the update, made available on Thursday in Lagos, its gross production in Nigeria averaged 23.1 Kboepd for FY 2024, broadly in line with the prior year’s 23.6 Kboepd, of which 88% was gas (FY 2023: 91%).
On the update, CEO of Savannah Energy, Andrew Knott, said, “I am pleased to provide a FY trading update which demonstrates the continued progress we have made in 2024, a year which saw the highest level of cash collections ever recorded by our Nigerian business. 2025 is expected to be an exciting year for our Company: we have a large planned operational programme in Nigeria which is anticipated to enhance both our oil and gas production levels and capacity; we intend to progress our R3 East oil development project in Niger; we continue to pursue key acquisitions in the upstream oil and gas space; and we continue to seek to build our power business.
“Fundamentally, Savannah remains unequivocally an “AND” company, seeking to deliver strong performance both for the short AND long term across multiple fronts, and pursuing growth opportunities in both the hydrocarbon AND power sectors.”
The update It also shows that it generated a Total Income of US$393.6 million in 2024, compared to FY 2023’s US$289.8 million. This consists of Total Revenues of US$258.7 million and Other operating income of US$134.9 million.
The report also shows that Savannah’s FY 2024 Total Revenues were ahead of the previously issued financial guidance of greater than US$245 million, while FY 2024 financial guidance is reiterated for Operating expenses plus administrative expenses at ‘up to US$75 million’. The company expects its FY 2024 capital expenditure to come in lower than planned (previously guided at ‘up to US$50 million’) due to the phasing of spend.
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According to the update, Savannah’s cash collections in 2024 amounted to US$248.5 million, a slight increase from the US$206 million it received in 2023. The report further shows that its cash balances as at 31 December 2024 stood at US$32.6 million, compared to the 31 December 2023 figure of US$107.0 million.
The report shows that the company’s midstream subsidiary, Accugas Limited, had as at 31 December 2024 drawn down on its NGN332 billion of the NGN Transitional Facility, with the resulting funds being converted to US$, which, along with cash held, was used to partially prepay the existing Accugas US$ Facility, leaving a balance as at 31 December 2024 of approximately US$212.3 million.
The report also provided new updates on Accugas’ US$45 million Uquo Central Processing Facility (“Uquo CPF”) compression project in Nigeria, noting that its commissioning which will enable the expansion of gas production in the medium term is well underway.
The report highlighted the progress being made in the procurement process of long lead equipment in Nigeria for a potential two-well drilling campaign on the Uquo Field in H2 2025, with an additional gas development well expected to add up to 80 MMscfpd of supplemental production capacity and a potential exploration well targeting an Unrisked Gross gas initially in place (“GIIP”) of 154 Bscf (25.7 MMboe) of incremental gas resources.
The update shows that progress is also being made in the planned Savannah acquisition of Sinopec International Petroleum Exploration and Production Company Nigeria Limited, whose principal asset is a 49% non-operated interest in the Stubb Creek oil and gas field (“Stubb Creek”), with regulatory approval and completion being targeted in Q1 2025. Following the completion of the acquisition, Savannah intends to commence an expansion programme which is anticipated to increase Stubb Creek gross production from an average of 2.7 Kbopd in 2024 to approximately 4.7 Kbopd.
In Niger, Savannah continues to seek to progress its 35 MMstb (Gross 2C Resources) R3 East oil development in South-East Niger, while it continues to push for a potential alternative transaction structure to acquire a material stake in producing oil and gas assets in South Sudan as previously announced on 20 December 2024.
On the renewable energy front, the update shows that Savannah has up to 696 MW of renewable energy projects currently in motion, including the up to 250 MW Parc Eolien de la Tarka wind farm project in Niger and the up to 95 MW Bini a Warak hybrid hydroelectric and solar project in Cameroon. A firm believer in Africa’s transition to renewable energy, Savannah continues to target a portfolio of up to 2 GW+ of power projects in motion by the end of 2026.
The Nigerian Economic Summit Group (NESG) has projected that the country has the potential to achieve a 5.5% growth in Gross Domestic Product (GDP) if critical policy reforms are sustained.
This was disclosed on Thursday during the launch of the NESG’s 2025 Macroeconomic Outlook report.
Speaking at the event, the Chief Economist and Director of Research & Development at NESG, Dr. Olusegun Omisakin, highlighted the need for more efficient policy implementation to unlock Nigeria’s economic potential.
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“We believe at the optimal level, if we embark on more efficient policy reforms, the Nigerian economy has the potential, the GDP to end up at 5.5 per cent, and we believe that this is achievable,” Omisakin stated.
More to follow……….
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