Alibaba Group Holding, China’s largest e-commerce company is seeking its initial public offering (IPO) in the U.S. following months of stalled deals with Hong Kong stock exchange over controversial terms in the listing, sources familiar with the plan said.
Alibaba’s debut, one of the most valuable in the tech sector after the 2012 Facebook IPO, is expected by market analysts to create a public company with a market value of $70 billion, and would measure investor appeal in China’s flourishing consumer market. It handily eclipses Twitter’s $30 billion initial offering this week.
The highly anticipated IPO will come around the first quarter of 2014, drumming up even more investor interest before the great event. This planned move by Alibaba to go overseas is a big loss to the Hong Kong bourse which has poised itself as the world’s most preferred venue for prominent new listings.
For months, founder Jack Ma and senior partners had been seeking approval for a corporate structure that would allow them to exercise control over board nominations even after an initial public offering or after the company has gone public.
In response, the Hong Kong bourse couldn’t allow such a system for fear it would encourage others to ask for similar special rights. However, a listing in New York would likely allow control of whom are nominated to the board seats.
The spokesman for Hong Kong Stock Exchange declined to comment on the botched talks.
Mr. Ma wrote to employees early in September to explain why they needed power in order to keep the company’s long-term goal, “We believe that only a group of people who are passionate about the company and are mission-driven will be able to protect the company from external pressure from competition and temptation to seek short-term gains.”
The company has decided to call off talks in Hong Kong. It has yet to file its IPO listing in the U.S. and plans to hire a U.S. law firm and banks to work on the deal.
In the U.S., the high profile, $70 billion listing in New York is shaping to be a battleground between behemoth bourses, the New York Stock Exchange and NASDAQ. Twitter reportedly picked the New York Stock Exchange and a beginning of snatching away mega deals from NASDAQ, which was full of glitches around the time of Facebook’s IPO last year.
Cornering 80 per cent of China’s online trading system, Alibaba Group Holding also operated e-commerce sites such as Taobao.com and Tmall.com Last year, the Hangzhou, China-based company became the world’s number one marketplace by generating sales that surpassed U.S. giants Amazon.com and eBay combined.
Bullish sentiments abound about the company’s IPO as revenue in Q1 was up 71 percent, to $1.4 billion. The strong earnings growth causes some brokerages to raise the valuation to $120 billion, higher than Facebook’s IPO last year.
The IPO will benefit immensely Alibaba’s two major stockholders, U.S. technology giant Yahoo and Softbank Corp. of Japan, worth billions of dollars. Softbank is the biggest shareholder with a 35percent share, and Yahoo holds 24 percent. Jack Maand Joe Tsai combined own 10 percent.
Written by: Janet Grace Ortigas
Sources: WallStreetJournal CNBC