Alibaba Group Holding Ltd, which powers 80 percent of all online
commerce in the world's second-largest economy, is expected to raise
more than $15 billion, and could top the $16 billion pulled in by
Facebook Inc when it listed in 2012.
The bulk of the proceeds will go to Yahoo Inc - which bought a 40
percent stake in Alibaba in 2005 for $1 billion and which must sell
more than a third of its current 22.6 percent stake through the IPO.
Alibaba also plans to sell new shares, people familiar with the
plans have said, to bulk up a cash war chest depleted by a rash of
While the Alibaba brand is less well known in the United States than
Internet companies such as Amazon.com and Facebook, the Chinese
company's listing has stirred the most excitement in Silicon Valley
and Wall Street since Facebook's record IPO. Alibaba will become the
largest Chinese corporation to list in the U.S. - on either the New
York Stock Exchange or the Nasdaq.
Alibaba will debut later this year in a market where high-flying
tech stocks like Twitter and Amazon have fallen in recent weeks in a
sell-off that has divided analysts and investors, reviving doubts
about soaring tech valuations.
Still, estimates of Alibaba's market value have soared in recent
months, to even beyond $200 billion, underscoring Wall Street's
eagerness to take a crack at a massive Chinese company with robust
Alibaba handled more than 1.5 trillion yuan - about $248 billion -
of transactions for 231 million active users across its three main
Chinese online marketplaces in 2013, more than Amazon and eBay Inc
combined. It did so with 20,884 full-time workers, fewer than eBay.
"If it's able to transport that kind of power to outside China, it
has the potential to become a true global e-commerce powerhouse,"
said Roger Entner, lead analyst and founder of Recon Analytics.
"Everybody thought Amazon could do it, but now we have to re-think
Amazon in the light of being the most successful company in that
field in the U.S. - but not in the world."
Alibaba did not give any hints in its IPO prospectus about potential
plans for the U.S. e-commerce market. Analysts said it was unlikely
Alibaba would adopt the model favored by Amazon, which sells goods
directly to consumers using a sprawling network of warehouses.
AT LEAST 102 YEARS
Alibaba, founded 15 years ago in a one-room apartment in Hangzhou
and controlled by a 28-member partnership, boasts of building a
company that will last "at least 102 years."
After the IPO, Alibaba said, the partnership will have the exclusive
right to nominate a simple majority of the members of its board of
Alibaba operates an online messaging service as well as a cloud
computing business, but more than 80 percent of its revenue comes
from its Taobao, Tmall and Juhuasuan online marketplaces. Top items
sold on Taobao include prepaid phone and game cards as well as
lottery tickets, home furniture and baby products, the company said.
Total revenue increased 62 percent to 18.75 billion yuan ($3.01
billion) in October-December of 2013 from a year earlier, while net
income more than doubled to 8.27 billion yuan, according to the
Some analysts say Alibaba's rapid pace of revenue growth may be
"They got into the e-commerce space when there weren't any other
players in China," said Forrester analyst Kelland Willis, adding
Alibaba has been "losing market share year over year."
By 2020, online retail sales in China will reach $420-$650 billion,
as much as the United States, Japanese, UK, German and French
markets combined, according to a recent analysis by McKinsey Global
Alibaba said China's mobile Internet arena, where it is battling
Tencent Holdings for supremacy, is the next growth industry. China
will have an estimated 750 million mobile Internet users by 2017,
according to data from China-based consultancy iResearch.
Roughly one-fifth of all purchases in the last quarter of 2013 were
made on mobile devices, up from 7.4 percent a year earlier. But
Alibaba added that for now these sales were less profitable than
those made on its website.
Already this year, Ma has been involved in acquisitions worth more
than $3.5 billion - buying a stake in department store operator
Intime; a majority shareholding in movie producer ChinaVision Media;
control of online mapping firm Autonavi; a stake in China's Wasu
Media Holding Co Ltd for online content and internet TV; and a stake
in Youku Tudou Inc, an online video business akin to Google Inc's
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Alibaba is also launching a U.S. e-commerce website, 11 Main, and
has taken stakes in U.S. retail site ShopRunner Inc, Lyft, a U.S.
ridesharing service, and 1stdibs, an online market place for
antiques and luxuries.
Also this year, Ma has set up a charitable trust estimated to be
worth $3 billion, potentially Asia's biggest, focusing on the
environment and health. "It's impossible for me to be a doctor, but
I can have my own way to save lives," Xinhua quoted Ma as saying.
OWNERSHIP AND RISKS
Some analysts have pointed to a less-than-transparent
decision-making process after Alibaba spun off fast-growing Alipay
in 2010 - a move that caused consternation at major shareholders
Yahoo and Japanese telecoms firm SoftBank Corp.
Alibaba's prospectus also laid out a raft of regulatory risks it
faces at home. The company stressed that Beijing could impose
additional restrictions on the use of Alipay, the payment service
that powers the majority of its online transactions.
Unlike many prominent U.S. tech IPOs of recent years, Alibaba's list
of significant shareholders is short. By contrast, Facebook and
Twitter each broke out shareholdings from more than a half dozen
individual principal shareholders.
Former English schoolteacher and lead founder Jack Ma owns 8.9
percent of Alibaba. Joseph Tsai, a co-founder and executive
vice-chairman, is the only other individual with a disclosed
shareholding, of 3.6 percent. Yahoo and SoftBank, respectively, own
22.6 percent and 34.4 percent of Alibaba on a fully diluted basis.
The proposed IPO of $1 billion in the filing is an estimate for
calculating exchange registration fees.
Alibaba estimated its fair value as of this month could reach $50
per share, an increase of more than six times from the $8 a share
value estimated in June 2011, according to the prospectus. This
calculation helps determine employee compensation and does not
necessarily represent a likely IPO price.
At the most recent fair value estimate, Yahoo's stake in Alibaba
is worth $26.2 billion and SoftBank's almost $40 billion. Ma's stake
would be worth $10.3 billion.
The fair value estimate puts Alibaba's size at $116.1 billion, well
below the $152 billion average from 25 analysts in a Reuters survey.
While Yahoo and SoftBank may be among the biggest beneficiaries of
the IPO, neither will exercise much control of Alibaba. It has
already been agreed that Yahoo Chief Development Officer Jacqueline
Reses will resign from Alibaba's board upon the listing, while
SoftBank will have the right to nominate just a single director to a
new, nine-member board.
Alibaba's decision to list in the United States was a blow to the
Hong Kong stock exchange, which was initially its preferred IPO
venue, but the city's regulators balked at any potential violation
of the "one-share-one-vote principle."
Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan,
and Morgan Stanley will underwrite the Alibaba IPO.
($1 = 6.2257 Chinese Yuan)
(Additional reporting by Gerry Shih, Sarah McBride, Deepa
Seetharaman and Nicola Leske in New York and Elzio Barreto in Hong
Kong; Writing by Edwin Chan; Editing by Alden Bentley, Andrew Hay
and Ian Geoghegan)
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