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Alibaba to float in the US, with the potential to become the largest IPO ever

The Chinese internet retailer Alibaba plans to float in the US in the biggest initial public offering since Facebook’s IPO in 2012.

Although little known outside China, the group dominates e-commerce in its home country, with the Gross Merchandise Volume (GMV) metric putting Alibaba at $171.2bn for 2012; compared to Amazon’s $87.8bn and eBay’s $67.8bn. The company’s announcement on Sunday did not give details of the timing or size of the flotation or which exchange it would use, with initial estimates valuing the offering at between $60-120bn. When Facebook floated in 2012 it was valued initially at $104bn.

The announcement ended months of speculation over where the company would list after talks for an IPO in Hong Kong fell apart in 2013. The Hong Kong exchange refused to grant Alibaba an exception from listing rules so that it could maintain a “partnership” structure, allowing its top executives (who own 10% of the company) to retain control of the board.

The group hopes that a US position will enhance its expansion prospects outside of China, where the company’s presence is nowhere near as strong.  Alibaba also hinted that the door had not completely shut on listing its stock in Hong Kong. If circumstances permitted, it would return float on its home market.

Founded by Jack Ma 15 years ago in a one-room apartment, the company has grown to encompass much of Chinese ecommerce, taking advantage of the booming consumerism in the country and online social networking. Its platforms include Alipay, Taobao and Tmall. According to the China Internet Network Information Center (CNIC) the number of online shopping users had reached 271 million by the end of June 2013. There was a growth of 28.89 million, or 11.9%, in the number of online shopping users compared with that at the end of December 2012.

China’s biggest social media company, Tencent Holdings, with the country’s number two e-commerce player, and China’s most popular messaging app, WeChat. Other brands (including Nike) are hoping to leave the Tmall platform to establish their own distinctive online presence in China.

Alibaba Group does not report its finances, but Yahoo, which owns a 24% stake in the company, said Alibaba’s revenue for the July-September quarter rose 51% from a year earlier to $1.8bn. That was down from 61% growth in the previous quarter and 71% growth in the first quarter of 2013.

Read our case study – Alibaba: China’s answer to eBay and Amazon – for more details on the online retailer.

Posted in Online Retail.

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