Alibaba Group Files For Potentially The Biggest IPO in U.S. History

Chinese e-Commerce company Alibaba files for IPO

The Chinese company is kind of a big deal when it comes to e-Commerce in China, accounting for 80 % of sales. The company has garnered a lot of press over the last two days.

Forbes covered it:

Chinese e-commerce giant Alibaba Group filed registration documents on Tuesday to go public in the U.S. in what may be one of the biggest initial public offerings in American history.

While the average U.S. consumer may be unfamiliar with Alibaba and its operations, Tuesday’s F-1 filing gives a clearer look into a business that accounts for 80% off all Chinese e-commerce and will rank among the world’s largest technology firms–among them IBM IBM -0.64% and Oracle ORCL -0.49%–once it goes public. Analysts recently polled by Bloomberg News valued the company at nearly $170 billion, while some expect that valuation to surpass $250 billion, once it starts trading.

“Although the value of Alibaba has been focused on the strength it has in the e-commerce space and its ability to expand outside of China, it is worth noting that the company has great potential to grow in the domestic market,” said Nicole Peng, research director for Canalys China. “And at this point an IPO is important to support its accelerating expansion.”

For now, the exact size of the IPO remains closely guarded. Though many expect the company to raise more than $15 billion in a public offering that may still be months away, the company used a $1 billion placeholder on its registration papers with the Securities and Exchange Commission. That number is just being used to compute filing fees, said a spokesperson for the company. Alibaba also did not include details on how many shares it would be selling or its valuation in its paperwork, though those details will be disclosed in the days leading up to the IPO.

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Kara Swisher at Recode took a look at how this deal will play in Silicon Valley, especially for Yahoo who will cash out for big money on the deal.

While there has been a lot of talk about what this will mean on a lot of different levels, one meme about the IPO that is entirely incorrect is that the upcoming Alibaba IPO has had little resonance in Silicon Valley. That could not be further from the truth.

Of course, there is the obvious reason: The big money for investors, many of which are here in Silicon Valley. That includes private equity powerhouse Silver Lake (well done, Ken Hao!), which has a big presence in tech. It invested about $500 million in Alibaba in 2011 and then in 2012, leading a tranche of investment from a number of players that totaled $3.9 billion for about five percent of the company at a then-$32 billion valuation.

Most of those lucky investors will not be selling into the IPO, said sources. In fact, besides some stock that Alibaba or its employees may sell, a large slug of the liquidity is likely to be from Yahoo. That is because it is required, unless Alibaba elects to let it keep the stake, to sell nearly half of its 24 percent stake as part of a previous agreement.

That’s a hefty bit of money for the Silicon Valley Internet giant — even if the shares of Alibaba do pop and make that haul look much smaller in comparison. But it will still be a big pile of cash for Yahoo — after it pays taxes, of course — to use for whatever purposes CEO Marissa Mayer finds worthy. She’s developed a pattern of paying up for companies, as well as people, but now the sky is presumably the limit. At least, if Google and Facebook don’t compete with her (anything she can pay, they can pay bigger).

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Comments

  1. says

    Yahoo will cash out about $10 Billion with its stake. Amazing story about the CEO of Alibaba, Jack Ma. I remember when he was a teacher of English in China and he was pitching his “English over the Internet” idea (which was an excellent idea). He stands to become the richest man in Asia.

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