Alibaba Urges Staff Restraint Ahead Of IPO Bonanza

The potential record-breaking IPO of Chinese e-commerce site Alibaba on the US stock market is causing its management to issue some unusual advice.

The company is warning its staff, who stand to reap massive financial returns from the listing, about the perils of their new-found wealth.

IPO Perils

Alibaba finally filed its IPO paperwork last month for a flotation which is expected to break records. Its F1 filing reveals that Alibaba expects to raise $1 billion (£589m). But earlier predictions suggest that the online retailer could actually raise as much as $15bn (£8.8bn) in its floatation.

It is not clear at this stage how much stock will be sold, but a Reuters poll of 25 analysts said that Alibaba could be worth $152 billion following the IPO, thereby instantly giving shareholders a valuable stock option.

Current and former Alibaba employees hold 26.7 percent of the company, but Alibaba has been busy preparing its staff for the financial rewards and has warned them not to be carried away and splurge on material goods, according to Reuters. It said staff could potentially be in line for a $40 billion (£24bn) windfall.

It seems that some staff members have already approached BMW dealerships in the eastern Chinese city of Hangzhou, to inquire as to whether the cars are available in orange, the corporate colours of Alibaba.

Staff have been receiving counselling on the matter, but 20,000 employees have already had the opportunity to sell part of their stakes during previous Alibaba structured share sales.

“The thinking was that if sudden wealth is like venom, giving small doses every now and then was a bit like anti-venom because your company isn’t thrown into chaos,” Reuters quoted a person familiar with Alibaba’s incentive plans as saying. The source wished to remain anonymous because they are not authorised to speak publicly on the matter.

Staff Retention

Alibaba has already acknowledged in its F1 filing its concerns about employee shareholders coming into new-found wealth, and maybe wanting to move on. “It may be difficult for us to continue to retain and motivate these employees, and this wealth could affect their decisions about whether or not they remain with us,” it said.

The IPO of Alibaba is to also provide a shot in the arm for some big name firms. The company’s largest single shareholder, with a 34.4 percent stake, is Japanese telecoms firm SoftBank Corp.

Yahoo meanwhile holds 22.6 percent of the company, after Alibaba recently splashed out $7.1bn (£4.1bn) to buy back some of Yahoo’s stake,

Of course it worth remembering that a lot of staff will not be able to immediately cash out their holdings through the IPO, as the majority of staff stock is likely to locked up for months following the listing.

What do you know about IT in China? Take our quiz!