Alibaba may prove to be ‘granddaddy’ of all IPOsAlibaba Group, China’s leading e-commerce company, is dangling a deal that could turn into one of the biggest IPOs in U.S. history.
In a long-awaited move made Tuesday, Alibaba filed papers for an initial public offering of stock seeking to raise at least $1 billion.
The documents set the stage for the technology industry’s biggest IPO public offering since Twitter and its early investors collected $1.8 billion in the online short messaging service’s market debut last fall.
Depending on investor demand for its stock, Alibaba could try to raise more money and even surpass the $16 billion that Facebook and its early investors raised in the social networking leader’s IPO two years ago.
“This is going to be the granddaddy of all IPOs,” predicted PrivCo CEO Sam Hamadeh, who has closely followed the market for years.
One of the reasons Alibaba may set a new IPO fund-raising standard is because one of its major shareholders, Yahoo, is supposed to sell about 208 million shares, too.
For now, Alibaba isn’t specifying how much stock will be sold in the IPO, or setting a price range or saying which U.S. exchange its stock will trade on. Those details will emerge as the IPO progresses. The process is likely to take three to four months to complete before Alibaba’s shares begin trading.
The rise of e-commerce in China has given millions of households wider access to clothes, books and consumer electronics in a society that in the 1980s still required ration tickets for some supermarket items. Shopping online has become popular as smartphones gave more Chinese consumers easy access to a computer and Alibaba’s launch of an online payment system, Alipay, which filled the gap for the shoppers who lacked credit cards.
Still growing at an explosive rate, online shopping is forecast by consulting firm McKinsey to triple from 2011 levels to $400 billion a year by 2015.
Although it’s not well known in the United States, Alibaba is an e-commerce powerhouse that makes more money than Amazon and eBay combined. What’s more, the company is still growing at a rapid clip as its network of online services, including Taobao, Tmall and Alipay mine a Chinese Internet market that already has 618 million Web surfers, roughly twice the size of the U.S. population.
Taobao is an online shopping bazaar similar to eBay while Tmall serves as an online outlet for major brands sold by major retailers. Alipay is an electronic payment service similar to eBay’s PayPal.
Last year, 231 million customers bought a total of $248 billion in merchandise on Alibaba’s e-commerce sites, according to the IPO documents. About $37 billion, or 15 percent, of that volume came through mobile devices.
Most of Alibaba is currently owned by four shareholders: Japan’s SoftBank, which holds a 34 percent stake and also controls wireless carriers Sprint in the United States; Yahoo, with a 23 percent stake; former CEO and co-founder Jack Ma with an 8.9 percent stake; and vice chairman and co-founder Joseph Tsai with a 3.6 percent stake.
Alibaba didn’t choose an optimal time to go public. Several Internet company stocks that soared last year amid high hopes have plummeted this year as investors reassess their prospects. Twitter has been among the hardest hit. Since hitting a peak of $74.73 late last year, the company’s shares have lost more than half their value. They closed Tuesday at $31.85, just slightly above their $26 IPO price.
Despite the skittish conditions for Internet stocks, most analysts expect Alibaba’s IPO to bring in at least $10 billion. Hamadeh predicts the IPO will be priced at the level that gives Alibaba a market value of $195 billion. That would eclipse Facebook’s current market value of $150 billion.
The IPO will cast a spotlight on Alibaba’s improbable rise. Alibaba started in 1999 with just $60,000 in the apartment of Jack Ma, a former English school teacher with no previous experience in business.