Alibaba Gives Bigger Incentive Fees to Credit Suisse, Morgan Stanley

Alibaba Group Holding founder Jack Ma in New York this past week. Reuters

In the historic initial public offering of Alibaba Group Holding Ltd. last week, it turns out that some banks were more equal than others.

In its final doling out of fees to underwriters for their work on the offering, Alibaba rewarded Credit Suisse Group Inc. CSGN.VX +1.19% Credit Suisse Group AG Switzerland: SWX Europe ^CHF26.29 +0.31 +1.19% Sept. 26, 2014 5:30 pm Volume (Delayed 15m) : 5.51M P/E Ratio N/A Market Cap CHF41.75 Billion Dividend Yield 2.66% Rev. per Employee CHF740,848 09/26/14 Goldman Puts New Limits on Som... 09/26/14 Alibaba Gives Bigger Incentive... 09/24/14 U.S. Stock Prices Gain, Helped... More quote details and news » CSGN.VX in Your Value Your Change Short position and Morgan Stanley MS +1.26% Morgan Stanley U.S.: NYSE ^$34.65 +0.43 +1.26% Sept. 26, 2014 4:01 pm Volume (Delayed 15m) : 7.98M AFTER HOURS ^$34.65 0.00 % Sept. 26, 2014 6:28 pm Volume (Delayed 15m) : 259,671 P/E Ratio 15.97 Market Cap $67.19 Billion Dividend Yield 1.15% Rev. per Employee $778,059 09/26/14 Goldman Puts New Limits on Som... 09/26/14 Alibaba Gives Bigger Incentive... 09/26/14 Rio Tinto and The Tough Busine... More quote details and news » MS in Your Value Your Change Short position the biggest share of a $50 million incentive pool, people familiar with the matter said. In contrast, the Chinese e-commerce company divided the bulk of the main $250 million fee pool in equal amounts among the top five banks on the IPO.

Credit Suisse and Morgan Stanley each received 22.5% of the incentive pool, or $11.3 million, the people said. That means each bank is expected to get roughly $49 million in total for their work on the deal when including their share of the base-fee pool.

Goldman Sachs Group Inc. GS +0.56% Goldman Sachs Group Inc. U.S.: NYSE ^$185.12 +1.03 +0.56% Sept. 26, 2014 4:00 pm Volume (Delayed 15m) : 1.90M AFTER HOURS ^$185.05 -0.07 -0.04% Sept. 26, 2014 7:37 pm Volume (Delayed 15m) : 31,110 P/E Ratio 11.39 Market Cap $81.11 Billion Dividend Yield 1.19% Rev. per Employee $1,109,820 09/26/14 Goldman Puts New Limits on Som... 09/26/14 Alibaba Gives Bigger Incentive... 09/26/14 New Fed/Goldman Tapes Emerge w... More quote details and news » GS in Your Value Your Change Short position and J.P. Morgan Chase JPM +0.68% JPMorgan Chase & Co. U.S.: NYSE ^$60.56 +0.41 +0.68% Sept. 26, 2014 4:01 pm Volume (Delayed 15m) : 11.70M AFTER HOURS ^$60.55 -0.01 -0.02% Sept. 26, 2014 7:51 pm Volume (Delayed 15m) : 252,149 P/E Ratio 15.53 Market Cap $226.24 Billion Dividend Yield 2.64% Rev. per Employee $404,867 09/26/14 Alibaba Gives Bigger Incentive... 09/26/14 Blackstone Skyscraper Sale Ope... 09/26/14 Japan Eyes GPIF Change Before ... More quote details and news » JPM in Your Value Your Change Short position & Co. each received about 18% of the incentive-fee pool, or around $47 million in total fees, the people said. Deutsche Bank AG DBK.XE +0.38% Deutsche Bank AG Germany: Xetra ^€27.70 +0.11 +0.38% Sept. 26, 2014 5:35 pm Volume (Delayed 15m) : 6.46M P/E Ratio N/A Market Cap €38.05 Billion Dividend Yield 2.71% Rev. per Employee €420,767 09/26/14 Alibaba Gives Bigger Incentive... 09/25/14 U.S. Stocks Sharply Lower 09/24/14 European Stocks Rebound But Eu... More quote details and news » DBK.XE in Your Value Your Change Short position got a smaller cut of the incentive pool, as did Citigroup, which also received a smaller slice of the base fee pool, the people said.

The tiered incentive fees are a final twist on Alibaba's unusual approach to the $25 billion offering, the largest IPO ever. Alibaba appointed a group of six banks to jointly run the offering and then handed out key jobs to each. That is in contrast to the typical practice in the U.S. of giving one or two underwriters lead roles and a lion's share of the fees. The company added the $50 million incentive on top of the standard fee, though until now it wasn't clear how it would be divvied up.

Payment of the incentive fees was triggered in part by the strong performance of the shares, which are up 33% since they were sold Sept. 18 for $68 each, according to people familiar with the deal. The share-price gains give the company a market value of roughly $220 billion. Alibaba shares rose 1.7% to $90.46 in 4 p.m. trading Friday on the New York Stock Exchange.

The total fee pool for Alibaba's underwriters now stands at 1.2% of the offering, topping the 1.1% that Facebook Inc. FB +2.03% Facebook Inc. Cl A U.S.: Nasdaq ^$78.79 +1.57 +2.03% Sept. 26, 2014 4:00 pm Volume (Delayed 15m) : 27.28M AFTER HOURS ^$78.83 +0.04 +0.05% Sept. 26, 2014 7:59 pm Volume (Delayed 15m) : 1.59M P/E Ratio 83.82 Market Cap $200.78 Billion Dividend Yield N/A Rev. per Employee $1,580,090 09/26/14 5 Things to Know About Ello, t... 09/26/14 Book Review: 'Not That Kind of... 09/26/14 Alibaba Gives Bigger Incentive... More quote details and news » FB in Your Value Your Change Short position paid on its $16 billion landmark IPO in 2012.

The first five main banks got roughly 15% of the base-fee pool each, leaving a total of 25% to be split between Citigroup and 28 lower-tier underwriters, which include Wells Fargo WFC +0.89% Wells Fargo & Co. U.S.: NYSE ^$51.87 +0.46 +0.89% Sept. 26, 2014 4:00 pm Volume (Delayed 15m) : 10.39M AFTER HOURS ^$51.80 -0.07 -0.13% Sept. 26, 2014 6:34 pm Volume (Delayed 15m) : 365,765 P/E Ratio 12.59 Market Cap $268.38 Billion Dividend Yield 2.70% Rev. per Employee $334,220 09/26/14 Alibaba Gives Bigger Incentive... 09/24/14 Goldman Sachs-Led Group Near D... 09/24/14 Investor Confidence Still Ding... More quote details and news » WFC in Your Value Your Change Short position & Co. and Evercore Partners Inc. EVR -0.24% Evercore Partners Inc. Cl A U.S.: NYSE ^$46.41 -0.11 -0.24% Sept. 26, 2014 4:00 pm Volume (Delayed 15m) : 511,558 AFTER HOURS ^$46.41 0.00 % Sept. 26, 2014 4:27 pm Volume (Delayed 15m) : 673 P/E Ratio 24.17 Market Cap $1.99 Billion Dividend Yield 2.15% Rev. per Employee $787,700 09/26/14 Alibaba Gives Bigger Incentive... 09/25/14 Zaoui Boutique Snaps Up $80 Bi... 09/16/14 Evercore Hires Aerospace Banke... More quote details and news » EVR in Your Value Your Change Short position Those lower-tier underwriters don't share in the incentive-fee pie.

The banks' incentive fees in part reflect their differing roles—and the costs they incurred—working on the offering, according to people familiar with the deal.

Credit Suisse and Morgan Stanley started the early IPO preparation work for the company last year, and worked on the materials used during the global "roadshow" with potential investors in September, the people said.

The two banks also split the job of overseeing the "lockup" agreement that prevents existing shareholders from selling more stock immediately after the IPO. Credit Suisse further handled the sale of shares to employees and other people close to the company, while Morgan Stanley was in charge of delivering shares and receiving payment from the offering.

Goldman oversaw the opening of the stock for trading and was tasked with stepping into the market to support the shares if they had fallen—which ended up being unnecessary given the strong performance.

J.P. Morgan, meanwhile, lead roadshow meetings with the biggest mutual-fund firms in Boston and Baltimore, whom Alibaba especially wanted to court as core shareholders, people familiar with the deal said. Despite touring the world on its roadshow, more than 80% of Alibaba's shares that were sold to institutions went to U.S. firms, people familiar with the matter have said.

Deutsche Bank led some meetings with investors on the West Coast of the U.S., where Alibaba will likely be an active investor in startups and aims to expand its presence, the people said.

Citigroup hosted the final nine-hour marathon meeting in New York last week to determine which investors would get stock. Citigroup also was designated the manager of the depository-receipt program that enables U.S. investors to buy shares in a foreign company.

In addition, Alibaba paid Rothschild, which acted as an independent adviser to the company, $9 million in fees, according to the filing, known as a prospectus.

Write to Telis Demos at telis.demos@wsj.com