Alibaba Group (阿里巴巴), the king of e-commerce in China, is dangling a deal that could turn into one of the biggest IPOs in US history.
In a long-awaited move on Tuesday, Alibaba filed for an initial public offering of stock that could surpass the US$16 billion that Facebook and its early investors raised in the social networking company’s IPO two years ago.
Alibaba’s paperwork says it will raise at least US$1 billion, but finance professionals believe that is a notional figure to get the IPO process rolling and say that the Chinese company’s ambitions for the share sale are much richer.
Photo: Bloomberg
“This is going to be the granddaddy of all IPOs,” said Sam Hamedah, CEO of PrivCo, which researches major privately held corporations.
Although it is not well-known in the US, Alibaba is an e-commerce powerhouse that makes more money than Amazon.com Inc and EBay Inc combined. The company reported earnings of US$2.9 billion on revenue of nearly US$6.5 billion through the first nine months of its last fiscal year ending in March. That topped the combined earnings of US$2.4 billion posted during the same April-December stretch by EBay and Amazon.
Those two companies collectively had revenue of US$71 billion during that period.
Alibaba is also expanding at a rapid clip as its network of online services, including Taobao (淘寶) Tmall (天貓) and Alipay (支付寶), mine a Chinese Internet market that already has 618 million Web surfers, about twice the size of the US population. Taobao is an online shopping bazaar similar to EBay, Tmall serves as an online outlet for brands sold by major retailers, while Alipay is an online payment system.
Last year, 231 million customers bought a total of US$248 billion in merchandise on Alibaba’s e-commerce sites, according to the IPO documents. About US$37 billion, or 15 percent, of that volume came through mobile devices.
For now, Alibaba is not specifying how much stock will be sold in the IPO, or setting a price range or saying which US exchange its stock will trade on. Those details will emerge as the IPO progresses. The process is likely to take three or four months before Alibaba’s shares begin trading.
One of the reasons Alibaba may set a new IPO fundraising bar is because one of its major shareholders, Yahoo Inc, is supposed to sell about 208 million shares, too. Credit and debit card processor Visa Inc holds the record for the richest IPO in the US at nearly US$18 billion.
Most of Alibaba is currently owned by four shareholders: Japan’s Softbank Corp, with a 34 percent stake; Yahoo, with 23 percent; former CEO and co-founder Jack Ma (馬雲) with 8.9 percent; and vice chairman and co-founder Joseph Tsai (蔡崇信) with 3.6 percent.
Alibaba did not choose an optimal time to go public. Several Internet company stocks that soared last year amid high hopes have plummeted this year as investors reassess their prospects. Twitter Inc has been among the hardest hit. Since hitting a peak of US$74.73 late last year, the company’s shares have lost more than half their value. They closed on Tuesday at US$31.85, just slightly above their US$26 IPO price.
Despite the skittish conditions for Internet stocks, most analysts expect Alibaba’s IPO to bring in at least US$10 billion. Hamadeh predicts the IPO shares will be sold at a price that gives Alibaba a market value of US$195 billion. That would eclipse Facebook’s current market value of US$150 billion.
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