The Lead: Alibaba IPO appears headed to the United States, joining Twitter
With the IPO market roaring and Twitter on the horizon, another big name in technology seems headed for an initial public offering in the United States, and it is expected to be larger than the San Francisco microblogging service's public debut.
Alibaba, a Chinese Internet giant built on a Yahoo investment, has reportedly given up on going public in Hong Kong and will instead list its shares on a U.S. exchange. While no official announcement has been made, anonymous sources told a range of news organizations -- including the Wall Street Journal, New York Times, Reuters, Bloomberg News and USA Today -- that the move would be made after talks broke down overseas.
"We've come to the end of dialogue with Hong Kong and we're pivoting to the U.S. to start the listing process," a company source told Reuters.
Yahoo owns 24 percent of Alibaba, even after working a $7.6 billion deal that sold about half its stake back to the company; the Sunnyvale Internet company invested $1 billion in Alibaba in 2005 for a 40 percent stake. While many have credited CEO Marissa Mayer's efforts in her first year-plus on the job with Yahoo's resurgence on Wall Street, investors and even Mayer herself have admitted that the company's stake in Alibaba is a major reason for stock market enthusiasm.
"There are certainly some smart investments that I owe to my predecessors. Very notably, Jerry Yang's investment in Alibaba is something that people are very excited about," Mayer said at a conference earlier this month; Yang is Yahoo's co-founder and former CEO.
Yahoo, already trading at five-year highs, gained 0.2 percent to $31.34 Wednesday and briefly topped $32 a share.
Alibaba's IPO is expected to reap more than Silicon Valley's premier IPO currently on the table. Twitter is valued at $10.5 billion in private transactions, Bloomberg reported Wednesday in a story that also claimed co-founder Ev Williams owns a 15 percent stake in the social network. Morgan Stanley, Goldman Sachs and Evercore have all predicted that Alibaba could be worth more than $100 billion at IPO time, which would rival Facebook for the highest valuation for a tech firm at IPO time.
Alibaba's attempt to list on the Hong Kong exchange hung up on the company's demand that its partners decide who sits on the company's board, instead of shareholders. Hong Kong's exchange does not allow dual-class stock structures that give early investors greater power than new stockholders, a tactic used by several Silicon Valley powerhouses including Google (GOOG) and Facebook; while Alibaba is not seeking a dual-share structure, its partnership model was still not acceptable in Hong Kong.
The Hong Kong Exchange's CEO said in a long, metaphorical Wednesday blog post that used characters called "Mr. Tradition," "Mr. Innovation" and "Mrs. Practical" that "as enshrined in our charter, in the event of a conflict, public interest is put ahead of shareholder interest."
The market for tech IPOs has reached a fever pitch of late: After seven Silicon Valley companies filed to issue their first batch of public shares in August, Twitter announced in early September that it had filed confidentially for an IPO. Last week, two Silicon Valley companies, FireEye and Rocket Fuel, priced their IPOs well above their initial ranges, then experienced gigantic first-day increases in their share prices. Both companies have added to those first-day increases since, with Rocket Fuel closing Wednesday at $57.68 and FireEye at $38.80.
Two more Silicon Valley tech companies are expected to go public this week, with Mountain View's Violin Memory and San Mateo's RingCentral expected to price their initial shares Thursday night and begin trading Friday morning. For live coverage of the pricing and first-day movement for those IPOs, go to www.siliconvalley.com.
SV150 market report: Record highs for Facebook, Tesla can't overcome losses for Apple, Google
Wall Street dipped slightly Wednesday, the fifth straight down day for stocks as investors' concern about a possible government shutdown grow. Silicon Valley stocks followed suit as all-time highs for Facebook and Tesla Motors (TSLA) were overshadowed by declines from Apple (AAPL) and Google.
Facebook's phenomenal recent rise on Wall Street continued, with shares gaining 2.1 percent to an all-time closing high of $49.46. As the Menlo Park social network stresses its mobile-advertising efforts, analysts are signing on: Canaccord Genuity initiated coverage of the stock with a "Buy" rating and $60 price target, part of a wave of recent analyst upgrades that reflect beliefs that, as Canaccord analyst Michael Graham wrote, "Facebook is early in innovating both for ad and user products."Tesla established new intraday and closing highs after Hertz announced that it would begin renting the Palo Alto company's Model S sedan at airports in San Francisco and Los Angeles; the stock moved as high as $186.30 before closing with a 1.6 percent gain at $185.24 after Wedbush increased its price target to $180.
Larger-cap Silicon Valley companies were not as fortunate Wednesday, sending the SV150 index down 0.3 percent. Apple fell 1.6 percent to $481.53 as Amazon introduced new iPad rivals in a refreshed lineup of Kindle Fire tablets on the same day the Cupertino company received more bad news about Apple Maps. Amazon dropped 0.5 percent to $312.65 on the day, and the news also did not boost the stock price of Google, which owns the Android operating system Amazon uses on its tablets: The Mountain View search giant dropped 1.1 percent to $877.23 on the day it officially launched same-day delivery service in the Bay Area.
Applied Materials continued to gain in the wake of its deal to merge with Tokyo Electron, gaining 2.3 percent to $17.84 while hitting prices the Santa Clara chip-equipment giant has not commanded since before the economic crisis. San Jose's Cypress Semiconductor continued to struggle after slashing its quarterly revenue projections Tuesday, with shares falling another 5.7 percent Wednesday to $9.10 as Wedbush downgraded the stock to "Neutral."
The SV150 index of Silicon Valley's largest tech companies: Down 3.81, or 0.28 percent, to 1,342.57
The tech-heavy Nasdaq composite index: Down 7.15, or 0.19 percent, to 3,761.1
The blue chip Dow Jones industrial average: Down 61.33, or 0.4 percent, to 15,273.26
And the widely watched Standard & Poor's 500 index: Down 4.65, or 0.27 percent, to 1,692.77
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.