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The Alibaba IPO is expected to raise roughly $20 billion sometime in September, which would make it the largest U.S. IPO ever, ahead of the $19.65 billion Visa Inc. (NYSE: V) raised in 2008 and the $16 billion Facebook Inc. (Nasdaq: FB) raised in 2012.
But the size of the Alibaba IPO won't only impact Alibaba Group Holding Ltd. (NYSE: BABA) shareholders and investors. A change in the deal's date is also having a major impact on other companies looking to hold IPOs in the coming months.
Originally, industry followers expected the company's stock would debut in August. Instead, the company wanted to wait until after the slower summer month passed. This gives the Alibaba IPO as much media coverage and exposure to prospective investors as possible.
Now several reports from both FOX Business and Bloomberg, citing unnamed sources, have claimed that Alibaba is eyeing Sept. 16 for its initial public offering.
However, the fact that the Alibaba IPO date was delayed has caused numerous other companies to postpone their public offerings as well…
Alibaba IPO's Effect on Other New Stocks
Following one of the most hyped IPOs of all time could make it difficult for smaller, lesser-known companies to sell new shares – especially if investors are spending big on Alibaba stock.
It's like a high school cover band taking the stage after the Beatles. They may have their charm, but they can't compete with the first act.
"Alibaba is going to get a lot of attention, and people will be distracted by it," Little Bear Investments LLC principal Zachary Prensky told The Wall Street Journal.
One example is the Royal Bank of Scotland Group Plc. (NYSE ADR: RBS), which had plans to spin off its U.S. bank, Citizens Financial Group Inc., in September. However, RBS has decided to delay the deal because of Alibaba, according to The Journal.
It isn't just the size of the Alibaba IPO that's worrying other companies. It's also the number of underwriters Alibaba is employing…
According to Alibaba's prospectus, Credit Suisse Group (NYSE ADR: CS), Morgan Stanley (NYSE: MS), JPMorgan Chase & Co. (NYSE: JPM), Deutsche Bank AG (NYSE: DB), Goldman Sachs Group Inc. (NYSE: GS), and Citigroup Inc. (NYSE: C) are all working on the deal.
And all of those companies have their work cut out for them. Alibaba is a Chinese company, registered in the Cayman Islands, listing in the United States. It's estimated that it could be valued near $200 billion. That leads to a complicated IPO process.
On top of that, the underwriters will also be attempting to sell $20 billion worth of shares. That's no small feat.
Because of those factors, these banks will be investing an abundance of time and energy in the Alibaba IPO, much to the dismay of other companies trying to hold public offerings.
In fact, according to The Journal, this is another reason RBS will delay its market debut; it shares some of the underwriters for its Citizens IPO with Alibaba.
But waiting until after the Alibaba IPO could actually benefit other IPOs – especially if Alibaba stock is successful in its first month…