Media Reports Alibaba IPO Moving Forward
March 16, 2014
By Juro Osawa
WALL STREET JOURNAL – Chinese e-commerce giant Alibaba Group Holding Ltd. said Sunday that it has decided to start the process of listing on a U.S. stock exchange, bringing to New York what could be one of the largest Internet initial public offerings in history.
In a brief statement posted in its website, Alibaba said a U.S. IPO—which people familiar with the matter said could raise as much as $15 billion—would “make us a more global company and enhance the company’s transparency.”
The statement didn’t go into listing details. But a person familiar with the matter said that Alibaba has decided to hire Credit Suisse Group, Deutsche Bank, Goldman Sachs Group, J.P. Morgan Chase & Co. and Morgan Stanley for major roles in the IPO.
Citigroup will also play a part, albeit a less senior role than the other banks, the person said. Alibaba hasn’t yet set a date for its IPO filing, or decided whether to list on the New York Stock Exchange or the Nasdaq Stock Market, the person added.
Alibaba’s statement sets the stage for the biggest U.S. IPO ever of a Chinese company. A $15 billion listing would top the dual New York-Hong Kong $5.7 billion listing of China Unicom Ltd. in 2000, according to Dealogic. Chinese Internet search company Baidu Inc.raised just $124 million in a 2005 IPO, though it now has a stock-market value of $56 billion.
The world’s biggest banks have been jockeying for a leading role in the Alibaba deal, which—based on past similar deals—could generate fees of more than $150 million. Being associated with the deal could also deliver valuable brand boosts for banks, not to mention future business.
Alibaba’s statement also appears to close the door finally on listing on the Hong Kong bourse, which had been vying with New York exchanges for the deal, but objected to some of Alibaba’s proposed listing terms. Alibaba may consider listing its shares in China in the future, the company said in Sunday’s statement, though it didn’t mention any specific plans.
“We respect the viewpoints and policies of Hong Kong and will continue to pay close attention to and support the process of innovation and development of Hong Kong,” Alibaba said in Sunday’s statement.
Total gross merchandise traded on Alibaba’s e-commerce sites last year was $240 billion, according to a person with knowledge of the figures. By comparison, the equivalent figure for Amazon.com Inc. last year was roughly $100 billion, according toForrester Research.
Alibaba’s revenues are far smaller than Amazon’s because the Chinese company doesn’t directly sell the products on its sites. But Alibaba’s business is highly profitable because many merchants who use its websites pay for advertising and other additional services.
In the three months through September, the most recent numbers available, Alibaba’s revenue rose 51% to $1.78 billion from a year earlier. Net profit stood at $792 million, giving the company a net profit margin of 44.6%, according to shareholder Yahoo Inc., which owns a 24% stake in Alibaba. In the same quarter, Amazon posted a loss of $41 million on revenue of $17.09 billion.
For the past few years, Alibaba has been increasing its presence in China’s financial sector. The Alipay electronic payment system for e-commerce transactions has expanded into micro lending and financial products that allow Alipay users to invest in a money-market fund.