Careless talk over Alibaba flotation costs Royal Bank of Canada $2.5m

Loose talk has cost Royal Bank of Canada $2.5m (£1.5m) after one of its bankers broke strict rules on initial public offerings (IPOs) and spoke about the imminent flotation of Alibaba.

The banker inadvertently intruded into Alibaba’s pre-IPO quiet period during a web seminar call, which forced RBC to pull out as one of the underwriters of the record-breaking flotation, forfeiting $2.5m in fees.

“Demand for shares of Alibaba are unbelievable. Unbelievable. Everybody wants to own it,” the banker, John Taft, said in the webinar according to the Wall Street Journal.

Taft, head of RBC’s US wealth management division, said Alibaba “may appreciate in value significantly over time” during the discussion titled “restoring investor trust in Wall Street, with broker-dealers and investment advisers”. However, Taft was speaking during Alibaba’s pre-IPO quiet period.

RBC said in a statement: “An employee unrelated to the Alibaba IPO process inadvertently made a comment about the transaction on an industry webinar during the period leading up to the offering.

“Consistent with our core values of putting our clients first and out of an abundance of caution, we voluntarily chose to withdraw from the IPO transaction.

“The comment did not impact the offering, and our decision to withdraw in no way reflects on either Alibaba or the IPO transaction.”

The webinar discussion was held on 8 September, a week before Alibaba floated. Taft was correct, as there was huge demand for Alibaba’s stock and the shares soared 38% to $93.89 on their debut.

The shares have continued to rise since, and hit a record high of $100.50 on Tuesday briefly valuing the company at $250bn – more than Walmart. However, Alibaba’s shares closed at $99.68, giving it a market capitalisation of $246bn but slightly less than Walmart’s.

Jack Ma, Alibaba’s founder, has been named China’s richest person with a $19.5bn fortune, according to Forbes Magazine. His wealth more than doubled from $7.1bn last year, when he was ranked eighth.

“We have a dream,” Ma said as he rang the opening bell to officially launch the flotation on the New York stock exchange last month. “We hope in the next 15 years the world changes because of us. We hope in 15 years people say this is a company like Microsoft, IBM, Walmart. They changed, shaped the world … We want to be bigger than Walmart.”

Ma claims to have got his inspiration from an unusual source: “The hero I had is Forrest Gump. I really like that guy … Every time I get frustrated, I watch the movie.

“I watched the movie again [before the float] telling me no matter what changed, you are you. I’m still the guy [of] 15 years ago, you know, I only earned like $20 a month. And today I can do [this] much.”

Powered by article was written by Rupert Neate, for The Guardian on Wednesday 29th October 2014 13.24 Europe/London © Guardian News and Media Limited 2010


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