Underwriters, exchanges, potential investors, and the public at large have waited, and waited, and waited for Alibaba's initial public offering (IPO). I even did an article on the frenzy over the company's IPO in the 30 September 2013 issue of Daily Trust. But no dice - nothing happened.
That is, until last week, when Alibaba finally filed for an IPO in the U.S., in what is predicted to become the biggest in Internet company IPO history. Thus, Alibaba's IPO event is predicted to trump, for internet companies, previous record holder Facebook's$16 billion; the amount that Facebook raised on the day of its IPO on May 18, 2012. At IPO, underwriters set Facebook's stock price at $38 a share, with a valuation of $104 billion. It is predicted that Alibaba will raise $20 billion at IPO, and be valued at $106 billion on that day. With these figures, only 36 U.S. companies, including Apple, Microsoft, Google, Intel, Amazon, and Facebook, will be more valuable than Alibaba.
When Jack Ma (also Ma Yun) founded Alibaba, the Chinese online marketing behemoth, in 1999, his vision was bold, hairy, audacious, and very clear: "I want to create one million jobs, change China's social and economic environment, and make it the largest Internet market in the world." A testament to the power of goal-setting, backed by a burning desire, good plans, disciplined correct actions, and persistence, Ma's dreams have been realized, as Alibaba is today the world's largest online marketplace.
Alibaba Group, which is like the American online payment or shopping companies eBay, Google, and PayPal rolled-up into one in terms of the range of offerings, is a hallmark of China's inroad into the world-stage on the exploitation of Internet technology for commerce. For example, in 2013, Alibaba processed 11.3 billion orders worth $248 billion, well ahead of Amazon and Ebay combined, with its sales accounting for a whopping 84% of China's total online shopping. Alibaba is a Hangzhou, eastern-China-based e-commerce giant that was founded by Jack Ma, a Chinese English teacher turned entrepreneur.
Like any successful entrepreneur, Ma has worked very hard for his company. He takes global acceptance very seriously, as manifested by the guests at the annual Alifest festival. Also, and as I detailed on 22 October 2012 in this column, Ma diligently put some processes in place to fight the flagrant IP violations associated with his company. Ma has also tried, with average success, to cut down on the incidence of fake products that find their way into his commerce. Nevertheless, the battles that took place across the pacific for Alibaba's stock exchange listing certainly attest to the company's overall financial success and prestige.
The frenzy over Alibaba's stock listing, which is expected to be marque listing, is nothing short of amazing. On the international dimension, it is evident that the company's home exchange (Hong Kong Stock Exchange) has lost out to U.S.-based exchanges, specifically, Nasdaq OMX Group and the NYSE Euronext, who have aggressively battled it out among each other to secure the listing. It's a pot of Gold out there, as Alibaba could be valued at more than $106 billion.
Ideally, Alibaba would have wanted to be listed with the Hong Kong Stock Exchange, but Hong Kong has security laws that prohibit the issuance of dual classes of stock, and the exchange also lacks other company-friendly structures that allow a minority of stockholders to control a company. On the other hand, these are non-issues in the US, which has more liberal security laws. Companies like Google and Facebook enjoy the dual-stock class scenario, which kind of empowers a subset of the shareholders to effectively control the company and preserve, in these cases, the tech core. Alibaba seeks this kind of control. The failure of Alibaba and Hong Kong Stock Exchange to reach a compromise in September of last year shifted the battle line to Wall Street in New York. The offering will also be underwritten by US banks.
The three main components of Alibaba's e-commerce operation cover business-to-business (B2B) online marketplaces, retail and payment platforms, shopping search engine and data-centric cloud computing services. Alibaba operates its business primarily out of China. Its B2B marketplace is driven by www.alibaba.com, through which importers and exporters from more than 200 countries and regions are brought together.
Alipay (www.alipay.com) was deployed in 2004 as a third-party online payment platform that probably has the biggest market share in China, with a claim to more than 650 million users. Alipay partners with up to 100 financial institutions, including Visa and MasterCard, to provide payment solutions for Taobao.com and Tmall.com, both owned by Alibaba, as well as to more than 460,000 Chinese businesses. Internationally, Alipay helps more than 300 worldwide merchants sell directly to consumers in China. It currently supports transactions in at least 12 major foreign currencies.
Although the exchange where the stock will be listed is still a matter of speculation, opportunities abound for those who are part of Alibaba's bandwagon, the least of which are not the investors. Moreover, the listing represents a huge opportunity for the underwriting banks - Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group, Inc.J.P. Morgan Chase & Co., and Mortgan Stanley. Softbank Corp., the Japanese bank that owns 30% of Alibaba will also receive a shot in the arm.
Where Alibaba's stock is eventually listed is probably not going to be as important as the role the event plays in shoring up the image of China.
The main idea of this article is that the Chinese e-commerce behemoth, Alibaba, has finally filed plans to offer shares publicly in the U.S. The IPO event is expected to take place in a few months.