By Scott Murdoch and Julie Zhu
HONG KONG (Reuters) - Chinese e-commerce giant Alibaba Group will raise up to $12.9 billion (£9.9 billion) from its landmark Hong Kong listing and is set to price its shares at a 2.8% discount to their New York close, sources with direct knowledge of the matter said.
The deal - the largest share sale in the city for nine years and a world record cross-border secondary share sale - will be seen as a boost to Hong Kong following more than five months of anti-government protests and its recent slide into its first recession in a decade.
Alibaba is due to officially price the deal later on Wednesday but three sources said investors had been told HK$176 was likely to be the end number.
"Unless there’s a dramatic change in market conditions, that will be the final price," said one source.
All three asked not to be named because the information was confidential.
At that price Alibaba would raise at least HK$88 billion (£9 billion)- a symbolic total because the number 8 is associated with prosperity and good fortune in Chinese culture.
It could eventually rise to $12.9 billion if a so-called 'greenshoe' over-allotment option were exercised.
An Alibaba spokesman declined to comment on the pricing guidance given to investors.
Alibaba shares closed in New York on Tuesday at $185.25, up 0.35%.
One of Alibaba's New York-listed American Depositary Shares (ADS) is worth eight of its Hong Kong shares.
While the discount to Alibaba's last close was set at 2.8%, analysts noted the price represented a 3.7% discount to the undisturbed Alibaba share price on Nov. 12 - the day before the deal was launched.
"I was expecting it to be done at around 4%-5% so this is about right," Sumeet Singh, head of research at Aequitas and who publishes on research website SmartKarma, said.
"The deal represents just about 4.4 days of three-month average daily value traded and hence, relatively it's not a big deal for a stock of Alibaba's size."
Alibaba's deal comes amid a late-year rush of share sales, with Saudi Arabia's state oil giant Aramco revving up to price an initial public offering so large it threatens to eclipse Alibaba's own record $25 billion float in 2014.
A deal at the top of Aramco's price range would raise $25.6 billion and value the company at $1.7 trillion - short of the $2 trillion it had originally sought.
HONG KONG BOOST
Hong Kong's army of small investors have welcomed the Alibaba deal, subscribing for so many shares they will be allotted the maximum 10% of the deal they could have got, three sources said.
Hong Kong operates a 'clawback' system where heavy oversubscription from small investors - in this case, at least 20 times the original 2.5% offered to retail - can result in them getting a greater share.
The numbers imply they have collectively put up at least $5.6 billion in the hope of getting shares in the Chinese ecommerce champion.
A float by Alibaba is seen as particularly significant to Hong Kong since it lost the company's IPO to New York in 2013 because the Asian financial hub would not then accept its unusual governance, where a self-selecting group of insiders control the majority of board seats.
That decision ultimately resulted in Hong Kong rule changes last year that have allowed Alibaba to conduct this listing.
Bankers hope other U.S.-listed Chinese tech giants will follow suit.
Alibaba's listing ceremony is due to be held at the Hong Stock Exchange next Tuesday and the event will be closely watched given the ongoing protests unfolding across the city.
China International Capital Corporation (CICC) and Credit Suisse are leading Alibaba's deal.
(Reporting by Scott Murdoch and Julie Zhu; Editing by Stephen Coates)