Alibaba Group, the Chinese e-commerce giant, is expected to go public on Friday in what is likely to be the largest IPO ever. Here’s what you need to know.
What is Alibaba? Started by Jack Ma in his apartment 15 years ago, it’s now China’s largest online retailer and has drawn comparisons to eBay and Amazon, although unlike the American e-commerce company, it doesn’t own the merchandise sold through its websites but it merely connects buyers and sellers. Alibaba’s Taobao and Tmall marketplaces last year handled $248 billion worth of transactions, according to The Wall Street Journal, which is more than Amazon and eBay combined.
Which are the sites under the Alibaba umbrella? Alibaba has several specialized companies. Here’s a selection:
Alibaba.com: a business-to-business trading platform for small businesses
Taobao: China’s largest consumer-to-consumer online shopping platform
eTao: a comparison shopping website for the Chinese retail market
Alipay: an online payment platform
11Main: a U.S. shopping website
When is the IPO happening? Alibaba is expected to price the deal on Thursday and shares will likely start trading on the New York Stock Exchange Friday under the ticker symbol BABA.
How much will Alibaba shares sell for? Alibaba raised the price range on Monday to $66 to $68, up from a $60-$66 range, reflecting strong demand from investors.
Why is the IPO such a big deal? Because it’s a really, really big deal — likely the world’s biggest IPO ever. If underwriters exercise an option to sell additional shares to meet the overwhelming demand, it could raise close to $25 billion, surpassing Agricultural Bank of China’s $22.1 billion listing in 2010, and Facebook’s $16 billion IPO in 2012. The Alibaba offering is likely to raise more money than the IPOs of Facebook, Google and Twitter combined.
What does this IPO mean for U.S. tech companies?
For most of them, more competition. Alibaba recently launched e-commerce site 11Main in the U.S., and will continue to expand its American operations. The IPO may already have drawn investors away from stocks like Amazon and eBay. For now, there’s one obvious winner in the tech crowd: Yahoo. The company, which owns 22.4 percent of Alibaba shares, could fetch about $36 billion if it sells these shares and the IPO is successful. It has already seen its stock price reach its highest level in more than 10 years.
The IPO also highlights some shifting trends in the stock market. For example, tech companies have traditionally listed on the Nasdaq but that has changed since Nasdaq has stumbled through some technical glitches, most notably with the Facebook fiasco in 2012, when the exchange’s system collapsed under the weight of so many trades.
How much is Alibaba worth? The IPO values the company at more than $163 billion, or slightly more than Amazon.com, which has a market cap just north of $150 billion.
Should I buy shares? Many have said that buying into Alibaba is ultimately a bet on China, a market that still has huge growth potential. But the company and its shares still present numerous risks for investors and banks closed the books early for IPO orders, which is a common practice for such large IPOs. If you’re eager to buy in, you’ll still be able to get in on the action once the stock starts trading.
Top Reads from The Fiscal Times: