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Product cover image for Alibaba's Bonds Dilemma: Location, Timing, and Pricing

Alibaba's Bonds Dilemma: Location, Timing, and Pricing

Emir Hrnjic

Product #:9B17N001_P
Supplier:Ivey/NUS
Discipline:Finance, International Business
Setting:China, 2014
Details:Case (PDF) • 19 pages • 2017-02-21 (Rev: 2020-07-20)

Subjects:

BondsInternetInvestment managementWeb-based technologiesPricing strategyBusiness managementFinance and investingInternational business

Industries:

Information technology and telecom sector

Geography:

ChinaAsia
Your Price:$9.71

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In 2014, Alibaba—the Chinese e-commerce giant who, in September 2014, completed the largest initial public offering (IPO) in New York Stock Exchange (NYSE) history—was preparing itself for an additional round of capital fundraising. This time, Alibaba focused its efforts on a new, large bond issue. Its chief executive officer would lead Alibaba’s finance team in meetings with investors in Hong Kong, Singapore, and London to gather information about this pending bond issue.

Although Alibaba was listed on the NYSE, an overwhelming majority of its revenues originated in China. Most U.S. investors had not heard of Alibaba until just a few months prior to its IPO in September 2014. Also, being a high-tech company, Alibaba was subject to the potential for large swings in valuations typical for the industry. Fluid valuations and matters related to country risk premia meant pricing the bond issue was going to be a challenge. How would Alibaba estimate the bonds’ pricing? Further, how should the firm determine the location and timing of the new bond issue?

Learning Objectives

This case is designed for an MBA or advanced undergraduate course in corporate finance, dealing with the topic of raising funds by issuing bonds. After completion of this case, students will be able to
  • assess the complexities related to issuing bonds, especially complexities related to risk, pricing, timing, and location of bonds issue;
  • understand emerging markets (in particular, China) and bond pricing differences (country risk premia) between China and the United States; and
  • evaluate the potential effect of certain governance structures (specifically, dual class ownership structures and VIEs).
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Case Study: Alibaba's Bonds Dilemma: Location, Timing, and Pricing | Ivey Publishing