Alibaba Group Faces Challenges Gaining Investor Confidence

Alibaba Group

Alibaba Group is filing for an IPO and faces the challenge of gaining investor confidence. The company owns and operates a website that puts businesses in contact with product manufacturers around the world, primarily in China. The site is a tool for those looking for a product production company.

Users of the website can locate manufacturers of products from a variety of industries, including cosmetics, automotive, medical and others manufacturers by searching for the products. There are also corporations that sell heavy equipment used by different businesses and machinery for the production of a wide range of products. Users have the ability to contact companies in real time through messaging or a chat feature as the manufacturers in other countries often have a significant time delay.

Representatives of the businesses listed on the site typically respond quickly and offer excellent customer service, which facilitates a smooth transaction and enjoyable experience. The site gives various company certifications to build consumer confidence. In addition to the search feature that allows users to search for manufacturers, customers can also post a request for an order for the product needed, quantity desired and the amount they wish to spend. Manufacturers can respond to those requests with offers, allowing the customer and provider to negotiate a deal through the site.

The site offers the ability to locate manufactures and communicate with them in real time. The site is user-friendly and can be a valuable tool for businesses to find manufacturers to partner with. Start-up companies and small businesses utilize the site to locate suppliers who allow them to purchase quantities that fit their budget and needs. This cuts down on the need for large initial orders and storage space for products ordered.

Although there are numerous businesses which depend on the site, Alibaba Group faces challenges gaining investor confidence as they plan their initial public offering (IPO) on the U.S. stock exchange. Investors have expressed concerns about investing in companies located in China due to past issues with Chinese companies creating false earnings reports. The law requires U.S. companies to produce and provide accurate quarterly earning reports to all investors, however the U.S. cannot oversee this practice in China. In addition to the issue of financial transparency, investors are concerned with how they will regulate the companies doing business on their site.

In an effort to gain investor confidence, Alibaba Group founder, Jack Ma, is considering a grueling week-long international road show or a series of marketing meetings to rally investor confidence before the company’s IPO in September. The marketing campaign is expected to start on September 3, 2014. Meetings would begin in Hong Kong and Singapore before moving on to Europe. He will end the campaign in the U.S. at an event in New York on September 8, 2014.

Alibaba Group is planning an IPO on the U.S exchange on September 16, 2014. The original IPO was expected to happen in August, but was pushed back for unknown reasons. The company may have delayed the original IPO so they would have additional time to market to investors and gain their confidence.

Ma has announced that in spite of the challenges Alibaba Group faces gaining investor confidence, he expects the IPO will be the largest ever for a stock offering on the U.S. stock exchange. Some investors believe Alibaba Group could be as successful as Google. The feelings regarding the company are mixed. There are major supporters, but others are apprehensive about purchasing stock in this company which is based in China.

By Amy Gilmore

The Wall Street Journal
The Economic Times

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