Alibaba Group Holding Ltd’s IPO is the biggest initial public offering in the U.S. with an evaluation of at least $160 billion. Bank of America Corp (NYSE:BAC) is among one of the few large banks who are not a part of this deal; however, Bank of America Corp (NYSE:BAC) has devised a secondary financial product to benefit from Alibaba’s IPO.
Bank of America Corp is offering a financial product that considers Softbank Corp (TYO:9984), largest shareholder in Alibaba, as a benchmark to evaluate Alibaba Group Holding Ltd. The bank has short positions that help it ignore other primary businesses of Softbank Corp (TYO:9984) including Sprint Corporation (NYSE:S) and Yahoo Japan Corp.
Considering the large number of investors looking for a way to benefit from the biggest IPO, Bank of America Cop (NYSE:BAC) is already making millions in commissions and the bank is likely to stop taking orders before the schedule. Bloomberg has revealed in a study that synthetic stock trading for Alibaba has increased three-fold since March 2014 and Bank of America charges nearly 1% for these products.
Experts are speculating commissions worth $30 million for all the major banks involved in Alibaba’s IPO including Credit Suisse Group AG (ADR) (NYSE:CS), Goldman Sachs Group Inc (NYSE:GS), Citigroup Inc (NYSE:C), Morgan Stanley (NYSE:MS), Deutsche Bank AG (USA) (NYSE:DB), and JPMorgan Chase & Co. (NYSE:JPM).
Alibaba Group Holdings Ltd announced its decision to offer shares in public in March 2014 after it failed to persuade Hong Kong regulators to accept its governance model. The experts are evaluating Alibaba at $200 billion and Yahoo! Inc. (NASDAQ:YHOO) is among one of the primary shareholders benefitting from Alibaba’s public offering.
This article has been written by Prakash Pandey.