Alibaba Group, which rode China's emergence as an economic superpower over the last 15 years to become a massive online marketplace for everything from forks to forklifts, filed today for what could become the largest U.S. initial public offering ever.
Founded by former English teacher Jack Ma, 49, in a Hangzhou apartment, Alibaba started with a few dozen items for sale. The company might raise as much as $20 billion, topping a $19.65 billion offering by Visa in 2008, data compiled by Bloomberg show.
Alibaba didn't specify the number or price of shares it will offer or what valuation it will seek. Those details will be provided closer to the actual sale. The filing has a $1 billion placeholder amount, which used to calculate registration fees and will change.
Alibaba's market value is estimated at $168 billion, bigger than 95% of the Standard & Poor's 500 Index -- and the most valuable Internet company after Google, according to data compiled by Bloomberg. The company is looking to sell about a 12% stake, people familiar with the matter have said, which would make the offering around $20 billion based on the estimated value.
The IPO will be a boon for Yahoo, which plans to sell part of its 22.6% stake in Alibaba.
With today's Securities and Exchange Commission filing, Alibaba begins a process that will take several months before it becomes a publicly traded company -- and involve revisions to the document and meetings with investors during a formal roadshow, after which a price for the shares will be set. The company also has to decide whether to list its shares on the New York Stock Exchange or Nasdaq Stock Market.
Alibaba is approaching U.S. markets riding a wave of investor enthusiasm for Chinese technology and internet companies. Eight such companies filed for $2.3 billion worth of IPOs in the first quarter, while 26 already-listed companies from web-portal Baidu to security-software maker Qihoo 360 Technology have gained a median of 60% in the past 12 months, data compiled by Bloomberg show.
Mr. Ma started Alibaba, an online marketplace for Chinese companies, in 1999 and its valuation has surged -- from a few billion dollars when Yahoo acquired its stake in 2005, to $32 billion when Silver Lake Management LLC, Temasek Holdings Pte and DST Global bought in six years later, to $153 billion in a February survey of analysts. That average estimate jumped again by 10% in a survey conducted last month.
$43.6B U.S. agency revenue
Alibaba now provides various marketplaces for buyers and sellers, as well as services that help them conduct their businesses. Taobao Marketplace, founded in 2003, enables millions of individuals and small businesses to sell products. Tmall.com operates as a virtual shopping mall, with retailers and brands offering products. Alibaba's other businesses include Juhuasuan, a flash-sales model, and eTao, a shopping search engine.
Alibaba's profit in the three months through December, profit more than doubled to $1.35 billion, as revenue surged 66% to $3.06 billion, according to a Yahoo investor presentation April 15.
Alibaba's businesses could be affected if China's economic growth continues to cool. Increasing competition on Taobao and Tmall has been squeezing profit margins for merchants, which could discourage them from using the platform.
The company's growth may peak along with its expansion in China, Francis Lun, the chief executive of Geo Securities said on Bloomberg television last month. Growing the business outside of China won't be as easy, he said, and one potential growth area has been blocked by regulators.
China's central bank in March blocked the issuance of virtual credit cards, in a move to tighten restrictions on online financial products. Alibaba's Alipay.com affiliate was among those planning to offer those cards.
Alibaba's U.S. filing comes after it was unable to persuade Hong Kong regulators to change rules to give Ma and other executives a unique way to control the company. In today's filing, Alibaba outlined a governance structure that allows a group of partners to nominate a majority of its board, with shareholders able to vote on the nominees.
Yahoo has been gradually exiting its stake in Alibaba, which bought back 20% of its shares from Yahoo in 2012, in a deal that valued the Chinese company at $35 billion. Sunnyvale, California-based Yahoo is poised to pare 40% of its remaining Alibaba stake in the IPO. The money could give Chief Executive Officer Marissa Mayer a chance to accelerate dealmaking or do stock buybacks.
Visa raised $19.65 billion in 2008, while Facebook -- which initially filed for an IPO with a $5 billion placeholder amount -- raised $16.01 billion. Among other Chinese companies to tap U.S. markets, the largest was the $3.4 billion share sale of China Life Insurance in 2003, data compiled by Bloomberg show.
As it heads toward the public markets, Alibaba has been moving rapidly to bolster its reach with investments and acquisitions in China and abroad. The company is in talks to regain a stake in its Alipay payments affiliate, a person familiar with the matter said this month. It transferred ownership of Alipay to a company controlled by Mr. Ma in 2010.
In April, Alibaba said it agreed to acquire AutoNavi Holdings, China's most popular mobile mapping service, and was part of a $250 million funding round for San Francisco-based ride-sharing application Lyft. In March, Alibaba said it would invest almost $700 million in Intime Retail Group, a Beijing-based owner of department stores and supermarkets.
-- Bloomberg News --