Fund managers look to make room for Alibaba

Tue Aug 26, 2014 2:42pm EDT
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By Deepa Seetharaman and Ryan Vlastelica

SAN FRANCISCO/NEW YORK (Reuters) - Investors are looking over portfolios to make room for Chinese e-commerce giant Alibaba Group Holdings Inc's market debut next month - and that means some less attractive stocks that funds are holding might be shown the door.

The initial public offering, which could top $16 billion to become the largest-ever IPO by a technology company, is expected as early as next month after Alibaba management kicks off a two-week investor road show after the Labor Day weekend.

As investors take a hard look at their portfolios, it may trigger a veritable garage sale of names that are failing to impress Wall Street, including U.S. e-commerce rival Inc, fund managers said.

"Any company that didn't meet expectations and give a rosy outlook is probably being considered as a sale candidate to make room for a name like this," said Jim O'Donnell, chief investment officer of Forward, which has $5 billion in assets under management.

"There won't be wholesale turnovers of portfolios, but I imagine Amazon is being looked at," he added.

Chinese rivals like Baidu Inc and Tencent Holdings Ltd also may be pressured if fund managers view Alibaba, which powers 80 percent of all online commerce in China, as a better path to tap into growth in the world’s second-largest economy.

Next month's roadshow is likely to attract interest from a wide range of funds, including those focused on emerging markets and technology. Alibaba may garner a valuation of $200 billion or more when it goes public, analysts say, which would make it one of the 20 biggest companies listed in U.S. markets.

"It is the 8,000-pound gorilla coming for the stock market," Michael Reynal, portfolio manager at San Francisco-based RS Investments, said of Alibaba.   Continued...

People play in a hall inside Alibaba's headquarters in Hangzhou, Zhejiang province, April 23, 2014. REUTERS/Chance Chan