Chinese E-commerce Giant Alibaba Files For IPO
May 07, 2014
By Ryan Mac and Brian Solomon
Chinese e-commerce giant Alibaba Group filed registration documents on Tuesday to go public in the U.S. in what may be one of the biggest initial public offerings in American history.
While the average U.S. consumer may be unfamiliar with Alibaba and its operations, Tuesday’s F-1 filing gives a clearer look into a business that accounts for 80% off all Chinese e-commerce and will rank among the world’s largest technology firms–among them IBM and Oracle –once it goes public. Analysts recently polled by Bloomberg News valued the company at nearly $170 billion, while some expect that valuation to surpass $250 billion, once it starts trading.
“Although the value of Alibaba has been focused on the strength it has in the e-commerce space and its ability to expand outside of China, it is worth noting that the company has great potential to grow in the domestic market,” said Nicole Peng, research director for Canalys China. “And at this point an IPO is important to support its accelerating expansion.”
For now, the exact size of the IPO remains closely guarded. Though many expect the company to raise more than $15 billion in a public offering that may still be months away, the company used a $1 billion placeholder on its registration papers with the Securities and Exchange Commission. That number is just being used to compute filing fees, said a spokesperson for the company. Alibaba also did not include details on how many shares it would be selling or its valuation in its paperwork, though those details will be disclosed in the days leading up to the IPO.
Founded in 1999 by former English teacher Jack Ma, Alibaba has expanded beyond its original blueprint as a web marketplace for Chinese companies. Having benefited from rapid economic growth within the country over the last decade, Alibaba has developed an all-encompassing retail ecosystem that ranges from payment systems to cloud computing services all with the purpose of supporting its main e-commerce plays including Taobao Marketplace and Tmall.
As of the end of December, the company had 231 million active buyers on its site, up 44% from the previous year. Alibaba also showed a strong position among mobile users, accounting for more than 75% of all Chinese retail done on mobile devices with 19.7% of its business coming from phones or tablets.
“For many Chinese consumers, [Alibaba] has provided a transformative experience, giving them access to products they would have never seen,” said Duncan Clark, chairman of BDA China. “What all of this did was create the architecture for e-commerce in China.”
That architecture has made Alibaba the largest e-commerce player in the world with total gross merchandise volumes on its platforms exceeding $248 billion in 2013, according to its financial filings. In the 12 months ending on March 31, 2013, the company booked $5.6 billion in revenue on profits of more than $1.3 billion. Nine months into its 2014 fiscal year, Alibaba stated revenues of more than $6.5 billion on profits of about $2.8 billion.
Forbes estimates Alibaba founder and Chairman Ma, who has a 8.9% stake in the company, to be the fifth-richest person in China with a net worth of $8.4 billion. Vice chairman Joseph Tsai maintains a net worth of about $3 billion. Both of their fortunes are expected to rise once Alibaba goes public.
After initially investing in 2005, U.S. web portal Yahoo owns 22.6% of Alibaba having sold back more than half its stake in the Chinese company in 2012 for more than $7 billion. Many analysts attribute Yahoo’s recent stellar stock performance to enthusiasm over its Alibaba holdings. After its latest earnings report in April, Yahoo shares surged after the company’s earnings supplement showed fourth-quarter sales at Alibaba rocketed 66% higher and net income soared 110% year over year. Due to shareholder agreements, Alibaba can force Yahoo to sell up to 40% of its remaining stake in the company, or 208 million shares, in its IPO.
Japan’s SoftBank is the company’s largest shareholder with a 34.4% stake. SoftBanks’ Chairman and CEO Masayoshi Son is one of four current members of Alibaba’s board, which the company eventually expects to swell to nine members.
The company did not specify an exchange or ticker symbol for its IPO. Banks involved with the deal include Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan Securities, Morgan Stanley and Citigroup.
Source: FORBES.com