Alibaba to file for US initial public offering

Bloomberg

Mon, Mar 17, 2014 - Page 15

Alibaba Group Holding Ltd (阿里巴巴), China’s biggest e-commerce company, will begin the process of filing for an initial public offering in the US that may be the biggest since Facebook Inc.

The announcement comes after Alibaba struggled to persuade Hong Kong regulators to approve a proposed governance structure that would allow its partners to nominate a majority of its board of directors. The company is open to listing in China “should circumstances permit in the future,” the company said.

Investment banks have valued Alibaba, founded by former English teacher Jack Ma (馬雲), at as much as US$200 billion, which would make it the second-biggest Internet company behind Google Inc based on market capitalization. A US share sale by Alibaba would be a blow to Hong Kong, which has not hosted an IPO of more than US$4 billion since October 2010.

“Alibaba from day one has been based around making money, and it’s a real Chinese Internet success story,” said Mark Tanner, the founder of China Skinny, a Shanghai-based research and marketing agency. “Alibaba is huge now, but will just continue to get a lot bigger.”

The IPO is codenamed “Avatar,” two people familiar with the matter have said.

An Alibaba IPO could raise about HK$100 billion (US$12.9 billion), Ernst & Young LLP said on June 28 last year. That would make it the world’s biggest first-time share offering since Facebook raised US$16 billion in May last year, and Hong Kong’s largest since AIA Group Ltd’s US$20 billion sale in October 2010, Bloomberg data showed.

Alibaba’s expansion since Ma started the company in his Hangzhou apartment in 1999 with two dozen items for sale, mirrors China’s emergence as an economic superpower.

The company had about 25,000 employees at the end of last month and generated about 70 percent of package deliveries in China in 2012. Customers bought 35 billion yuan (US$5.7 billion) of goods on one sales promotion day via Alibaba’s two main platforms last year.

The success has made Ma, 49, one of China’s richest people, with an estimated net worth of US$11.4 billion, according to the Bloomberg Billionaires Index.

There is still room for growth. China has 618 million Internet users, greater than the population of any other country except India, and McKinsey & Co estimates China’s Internet retail market will triple to US$395 billion from 2011 to next year.

Analyst valuations of Alibaba rose 28 percent after the earnings, with the company worth US$153 billion, according to the average of 10 estimates compiled by Bloomberg News last month.

Macquarie Group Ltd estimated Alibaba could be worth US$200 billion, while Goldman Sachs Group Inc in a Jan. 29 report put the company’s value at about US$150 billion.

Google has a market capitalization of US$400 billion, Amazon US$171 billion and Facebook, US$175 billion, according to Bloomberg data.