Alibaba Finally Files For IPO

The IPO of Chinese e-commerce site Alibaba on the US stock market has moved one step closer. The company filed its paperwork with the Securities and Exchange Commission (SEC) on Tuesday, for a flotation which is expected to break records.

The F1 filing reveals that Alibaba expects to $1 billion (£589m). But earlier predictions suggest that the online retailer could raise as much as $15bn (£8.8bn) in its floatation.

IPO Filing

The IPO filing did not reveal how much stock will be sold, and it also failed to set a price range. However it has been suggested in some media reports that the company intends to sell around 12 percent of its shares, which could mean the IPO brings in around $20 billion (£11.8bn). Facebook in comparison raised $16 billion (£9.4bn) in its IPO.

These types of figures would value Alibaba at more than $165 billion (£97.3bn). However this is just speculation for now, and hard figures will only be made public further down the line, as the IPO progresses. If it follows the usual route to market, it could take four months before the Chinese company begins trading on the New York Stock Exchange.

“We are the largest online and mobile commerce company in the world in terms of gross merchandise volume in 2013, according to industry sources,” said the company in its prospectus. “We operate our ecosystem as a platform for third parties, and we do not engage in direct sales, compete with our merchants or hold inventory.”

What makes Alibaba attractive to foreign investors is the fact that the company holds an 80 percent share in the promising Chinese e-commerce market. Its Taobao and Tmall websites and Alipay payment system give it access to China’s 618 million web surfers.

And its financial results also revealed very healthy profit margins. For the nine months of its fiscal year 2013 it posted net income of $2.85 billion (£1.7bn) on revenues of $6.51 billion (£3.8bn).

Yahoo Windfall?

The IPO could also have a dramatic impact for Yahoo. This is because most of Alibaba is owned by four shareholders: Japan’s SoftBank Corp with a 34 percent stake; Yahoo with 23 percent; former CEO and co-founder Jack Ma with 8.9 percent; and vice-chairman and co-founder Joseph Tsai with 3.6 percent.

The Chinese company recently splashed out $7.1bn (£4.1bn) to buy back some of Yahoo’s stake, which was originally higher than the current level, but Yahoo still owns 23 percent of the company.

If Alibaba gains a market valuation of $200 billion (£118bn) for example, Yahoo will be sitting with a potential asset worth $50 billion (£29.4bn) – more than the current stock market valuation of the whole of Yahoo.

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