Alibaba heads for a record IPO

China’s e-commerce giant Alibaba, described as a mixture between Amazon and eBay, but bigger than both, has confirmed it will seek to float in New York later this year. The number or price of shares it plans to offer have yet to be decided, but the company is expected to sell around 12% of itself.

As it is estimated to be worth around $170bn ($20bn more than Facebook), its initial public offering could be worth around $20bn, which would be a US record.

What the commentators said

It is an attractive bet on the rise of the Chinese consumer, said MarketWatch.com’s Rolfe Winkler. Alibaba is the world’s largest online market place, easily outpacing the combined transaction volumes of eBay and Amazon.

Revenues, gleaned from sales commissions and advertising by merchants, jumped 62% to $8bn last year. Alibaba’s operating margin is 50%, compared to 37% at Facebook and 28% at Google. And its growth prospects look “extraordinary”. Only 46% of Chinese are online so far.

All that sounds great, noted Aaron Back in The Wall Street Journal. But the initial public offering prospectus is hazy on the prospects for making money off mobile traffic. “Firms that can’t show their business migrating well from desktops to mobile devices have justifiably fallen out of investor favour.”

This is especially important in China as new internet users tend to come straight to smartphones. It’s also where the “fiercest competition” is.

Merryn

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