Chinese tech firm Alibaba could net $15B in its U.S. IPO

4/19/2014
LOS ANGELES TIMES
  • Jack-Ma-and-Yahoo-10-03-2011

    Jack Ma, CEO of Chinese internet company Alibaba.

    ALIBABA GROUP

    • Ma
    Ma

    LOS ANGELES — The largest tech IPO of the year will come from a company that many Americans have never heard of.

    Alibaba Group — a Chinese ecommerce behemoth — has decided to go public in the United States after months of speculation that it would list in Hong Kong. The company could raise up to $15 billion at an estimated valuation of up to $200 billion.

    The company could file documents related to its initial public offering as soon as next week.

    “We expect it to be the largest tech IPO ever, the largest IPO of the year, the largest Chinese IPO of the year,” said Max Wolff, chief economist and strategist at Citizen VC. “It’s a big number, probably a record-breaker by any metric.”

    Alibaba’s initial public offering plans are part of a wave of Chinese companies going public in the United States this year. Twitter-like platform Weibo began trading on the Nasdaq on Thursday, and Alibaba rival JD.com filed for a $1.5 billion listing in January.

    The prospect of a blockbuster IPO for Alibaba is already igniting the kind of frenzied investor interest that swirled around Facebook Inc. in 2012 and Twitter Inc. in 2013.

    Alibaba is often compared to eBay Inc. and PayPal, but its interests are much wider. They include banking, maps, cloud computing, online music service, and TV and film production. The company also has a stake in Weibo.

    Alibaba was founded in 1999 by a group of 18 people, led by Jack Ma, a former English teacher from Hangzhou, a city near Shanghai. Yahoo Inc. was an early investor and still owns about a quarter of the company; Japan’s SoftBank Corp. has a substantial 37 percent share.

    When Yahoo reported its quarterly earnings Tuesday, it revealed that revenue at Alibaba surged 66 percent, to $3.06 billion, in the fourth quarter compared with a year earlier. Its net income more than doubled to $1.36 billion.

    That makes Yahoo’s 24 percent stake worth $42 billion — more than Yahoo’s own market capitalization, according to an estimate by private company financial intelligence provider PrivCo.

    “Yahoo made a huge and, in retrospect, very smart investment in Alibaba when Alibaba was very small and Yahoo wasn’t,” Mr. Wolff said.

    Now the reverse is true: Yahoo’s dominance has faded, and Alibaba has grown into a global powerhouse.

    Going public in the United States has become an attractive option for Chinese companies, particularly those in tech. Stock exchanges in mainland China are struggling and subject to restrictive controls, including a 10 percent daily limit on how much a stock can gain or lose after the first day of trading.