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China’s Alibaba Group, one of the world’s largest internet based company, filed initial public offering (IPO) documents on Tuesday, outlining its plans to sell shares in New York, which would make it the largest Chinese corporation on an American exchange. The IPO will also place Alibaba as the biggest technological market debut in history.
The company, which is said to be the Chinese version of Amazon and e-Bay, plans to raise $20 billion by selling a 12 percent stake, which would surpass the $16 billion raised by Facebook in 2012. Alibaba would also top the $19 billion raised by Visa, after its IPO in 2008. Visa, the San Francisco-based credit card processing company, currently holds the title of having the largest IPO ever, a record previously held by AT&T with an amount of $11 billion.
Current evaluation estimates that the Alibaba e-commerce company is worth over $168 billion, which makes it the second most valuable internet company behind Google. Google has a market capitalization value of $395 billion. Last year the Alibaba Group sold more than e-Bay and Amazon combined, with record orders of 11.3 billion, which is set to increase after its IPO filing is complete. Yahoo, which owns a 22.6 percent stake in the company is also due to gain from Alibaba’s IPO. Softbank also has a 34.4 percent stake in the company.
Alibaba is a significant enterprise in China’s internet market and commands four-fifths of all online commerce conducted in the country. In 2013, net income from $5.6 billion in revenues was reported to be $1.4 billion. Founded by Alibaba’s in 2003, Taobao, an internet marketplace for businesses and individuals to open online stores, has 800 million product listings from over 7 millions sellers. Recently, Alibaba spent $1.2 billion to acquire 18.5 percent stake in the online video company Youku Tudou, which is equivalent to YouTube and Netlfix.
Roger Entner, founder of Recon Analytics, states that “Alibaba has the potential to become a global powerhouse.” Entner believes that Amazon must be reconsidered as a major market player in the United States but not on a worldwide scale in comparison to the Alibaba Group.
The Alibaba Group Holdings Ltd was co-founded by Jack Ma and Joseph Tsai in 1999, after Tsai left his executive position at a Swedish investment firm in Hong Kong to join Ma in what was then a little known e-commerce internet site. The business venture has turned its founders into billionaires, whose fortunes are set to triple in 2014, after their company’s IPO. According to Bloomberg Billionaires Index Jack Ma’s net worth is $12.5 billion while Joseph Tsai is said to be worth $4.8 billion.
Alibaba’s Group IPO filing came just weeks after another Chinese company, Wiebo, the Twitter of China, began trading in the US market with an IPO priced at $17. Weibo’s goal was to raise $400 million. Alibaba’s IPO is to be underwritten by Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan and Citigruop. The company has not yet made a decision as to whether the listing will be placed on Nasdaq or the New York Stock Exchange, while other specifics of the IPO are still to be determined.
By Humphrey Bennett