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The biggest IPO Ever Alibaba Group

Alibaba

Before 1999, the word Alibaba was just a fairy tale about a guy’s adventure with a group of 40 thieves in “One Thousand and One Nights”, but Jack Ma changed that.  The English teacher from Hangzhou, China started the website as a business to business (B2B) portal to help Chinese manufactures export their products overseas.  It was the perfect timing, since that was at the height of China manufacturing boom that lasted another decade afterward.   Now Alibaba.com features nearly a billion products and is one of the most visited website in the world, and that’s not all, folks.  In 2003, Jack decided to start a consumer to consumer (C2C) platform that can connect people who want to get rid of their junk, similar concept to Ebay, which Taobao was born.  Taobao in Chinese literally means “Filter/Find Treasures”.  As of 2010, Taobao’s revenue was over $60 billion.  In fact, similar to people in United States to refer to search as googling, in China, if someone wants to find a good deal online, they will “Tao” online.  With all this online transactions, Jack started Alipay, similar to Paypal that handles the millions of transactions that goes on.   Wait, but the story doesn’t end there, in 2008, Tmall, a C2C platform as well, was started by Alibaba Group to offer global brands for more affluent consumers in China.  Since then, Alibaba has extended its treasure hunt to social networking such as Laiwang, similar to Tencen’ts (QQ) WeChat, media such as substantial stake in ChinaVision Media Group and Youku Tudou (similar to Youtube).  

Alibaba HQ

So you might have a few questions on this Initial Public Offering (IPO)of Alibaba that’s supposed to be available to U.S. market this fall.  Let me try my best to answer them.

Why did Alibaba  filed the IPO in U.S. market.  

Well, mainly for corporate structuring reason.  Jack and his team want control of the board but Hong Kong and Chinese stock exchanges won’t allow a minority shareholder to have control of the board, but U.S. market allows that, e.g. similar to how Facebook is structured.  

How big is Alibaba really?

Let’s put it this way, Alibaba makes more money than Amazon and Ebay combine.

Who would profit most right off the bat from Alibaba IPO?

Well the early investors such as Softbank and Yahoo with each owns more than 20% of the company, Jack Ma and his earliest followers, and the big underwriters investment banks if the IPO was a success

Should I buy into the Alibaba IPO?

In my humble opinion, I think Alibaba has a bright future ahead of itself simply on few fronts: it is ahead of pack in B2B and C2C business; It has vertical control from source of manufacture, consumer, to the popular payment system Alipay, and it’s branching out to other areas so it’s growing.  Millions of more Chinese consumers are coming online every year so I think Alibaba hasn’t reach its full potential yet;  Under leadership of Jack Ma, it has a great management team with proven track record.  The only thing I’m unsure of is the price of the IPO, depending on the demand of the IPO which I suspect will be very high, it might be a little pricey to own, we shall see.

What are the risks?

With any investment, there are always risks.  Remember, Alibaba is operating in People Republic of China, a communist party state, so if the company pisses off the party for any reason, then the company could be in  trouble.  Alibaba also has fierce competitions in all areas of its business.  Another risk might be loss of Jack Ma, he has been the corner stone of the company since the beginning.  

If you have any other question, please don’t hesitate to contact the team or comment below.

 

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