Chinese E-Commerce Giant Alibaba Opts for U.S. IPO
Chinese e-commerce giant Alibaba Group Holding Ltd. announced Sunday that it has started the process of becoming a publicly traded company in the United States. According to a company blog post, Alibaba intends to enter the American market in order to become a “more global company.”
It’s estimated that Alibaba’s initial public offering could generate more than the $16 billion that social media titan Facebook Inc. (NASDAQ:FB) raised in its much-hyped initial public offering almost two years ago. If so, Alibaba’s IPO would be the biggest ever, and according to the New York Times, analysts are estimating that the company could garner a valuation of more than $130 billion.
The company is currently in discussions with more than six banks for lead underwriting roles: Credit Suisse, Citigroup, Deutsche Bank, Goldman Sachs Group, J.P. Morgan, and Morgan Stanley. Most of the six banks included in discussions will likely win the role of joint global coordinator, sources told Reuters.
The U.S. IPO of Alibaba will reportedly make the company’s founders incredibly wealthy, including founder and former English teacher Jack Ma, who began Alibaba as a startup running out of his apartment. The listing will likewise bode well for the six banks involved in the underwriting. Reuters reports that the deal is estimated to yield $260 million in underwriting fees, assuming a 1.75 percent commission.
Alibaba is a unique e-commerce company; in the U.S., there currently isn’t anything quite like it. The New York Times reports that Alibaba is “part eBay, part Google and part PayPal.” Reuters added that Alibaba currently handles more goods than eBay and Amazon.com combined. Alibaba’s mission, according to the company’s website, is “to make it easy to buy and sell anywhere in the world.”
Alibaba Holding began in 1999 as a Chinese shopping site, but it has since spawned a number of different Internet businesses: “Since its inception, it has developed leading businesses in consumer e-commerce, online payment, business-to-business marketplaces, and cloud computing,” the company’s website reads. The company currently controls approximately 80 percent of China’s e-commerce.
Alibaba’s decision to go public in the United States is a bit of snub to the Hong Kong stock exchange, which was initially the company’s preferred locale for an IPO. The Hong Kong stock exchange took issue with the company’s partnership structure, in which the firm’s top executives maintain control of the board though they own a minority of shares overall, comprising just 10 percent of the company. This violates a Hong Kong stock exchange rule that prohibits any arrangement that gives shareholders more than one vote per share.
“We wish to thank those in Hong Kong who have supported Alibaba Group,” the company said in its blog post. “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.”