News / Economy

US Investors Eye IPO for China's Alibaba

Employee seen behind glass door of Alibaba's company headquarters on the outskirts of Hangzhou, China, April 23, 2014.
Employee seen behind glass door of Alibaba's company headquarters on the outskirts of Hangzhou, China, April 23, 2014.
Victor Beattie

U.S. investors are preparing for Chinese e-commerce giant Alibaba's market debut next month, when it is expected to begin trading on the New York Stock Exchange at a value of roughly $200 billion, potentially one of the largest initial public offerings, or IPOs, ever.

Slated to go public in early September, Alibaba may become one of the most valuable companies in the world, with a market capitalization of up to $250 billion, compared with other tech giants like Apple at $602 billion, Google at $400 billion and Microsoft at $374 billion.

The Alibaba Group reported a jump in second quarter earnings ahead of the IPO, with total revenue climbing 46 percent from year-ago levels to $2.54 billion.

Last year, Alibaba, which accounts for about 80 percent of all online commerce in China, handled more Internet transactions than U.S.-based Amazon and eBay combined, with more than 230 million active buyers, about 17 percent of China's population.

The privately owned Hangzhou-based group is one of China’s Big Three Internet companies — along with social media and video game behemoth Tencent and search engine giant Baidu.

“Online businesses tend to have not only economies of scale but network effects, where people want to use the same website everyone else is using – it makes business easier,” said Indiana University’s Scott Kennedy.

“Alibaba has an excellent business model and has done very well, while Tencent, Baidu and others dominate in their niches,” he said.

Alibaba is looking to sell a 12 percent stake in the IPO. As a result, the company could raise more than $20 billion and rank among the largest ever in the United States, Bloomberg reported.

By 2020, Alibaba’s online retail sales in China could reach $650 billion, as much as the United States, Japan, United Kingdom, Germany and France combined, according to the U.S. management consultancy McKinsey & Company.

China has become the world's second-largest e-tail market, with estimates as high as $210 billion for revenues in 2012 and a compound annual growth rate (year-over-year) of 120 percent since 2003.

It commands more than five percent of total retail sales worldwide, almost all on digital marketplaces.

China’s weak stock market

But despite China’s economic power, the country’s nascent stock market – created in the 1990s – has so far underwhelmed, according to Kennedy.

“Chinese companies have been trying to raise capital on stock markets for a long time [but] within China listing has been difficult and the market has not done very well,” said Kennedy, who runs Indiana University’s Research Center for Chinese Politics & Business.

“It’s ironic that a fast-growing Chinese economy has not supported a healthy stock market whereas a slower-growing U.S. economy has,” he said.

The U.S. and China have seen political tensions escalate of late over cyber-spying and security matters in the South China Sea, but that has not stopped the two economies from continuing to integrate.

Alibaba’s expected New York IPO should take that process to another level.

“Alibaba is a true-blue private firm started by Jack Ma, who originally was an English teacher. Really, it’s a Horatio Alger [rags to riches] story for China, something that a lot of Americans can identify with,” Kennedy said.

Mark Snowiss contributed to this report.

You May Like

Philippines, Muslim Rebels Try to Salvage Peace Pact

Peace process faces major setback after botched military operation to find terrorists results in bloody gunbattle between government forces, Moro Islamic Liberation Front fighters More

Republicans Expect Long, Expensive Presidential Battle

Political strategist says eventual winner will be one who can put together strongest coalition of various conservative groups that make up Republican Party More

Video New Wheelchair Is Easier to Use, Increases Mobility

Engineers have come up with a lever-operated design that makes use of easily accessible bicycle technology More

This forum has been closed.
Comment Sorting
Comments
     
by: Frankie Fook-lun Leung from: Los Agneles
August 27, 2014 11:17 PM
Mr. Kennedy's view may not be representative of the American investment community. The governance standard of Chinese companies is still a major concern, to put it mildly.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Islamic State Prisoners Talk of Curiosity, God, Regreti
X
Zana Omer
March 28, 2015 1:19 AM
The Islamic State fighter, a prisoner of Kurdish YPG forces, asked his family asking for forgiveness: "I destroyed myself and I destroyed them along with me." The Syrian youth was one of two detainees who spoke to VOA’s Kurdish Service about the path they chose; their names have been changed and identifying details obscured. VOA's Zana Omer reports.
Video

Video Islamic State Prisoners Talk of Curiosity, God, Regret

The Islamic State fighter, a prisoner of Kurdish YPG forces, asked his family asking for forgiveness: "I destroyed myself and I destroyed them along with me." The Syrian youth was one of two detainees who spoke to VOA’s Kurdish Service about the path they chose; their names have been changed and identifying details obscured. VOA's Zana Omer reports.
Video

Video Germanwings Findings Raise Issue of Psychological Testing for Pilots

More is being discovered about the co-pilot in the crash of Germanwings Flight 9525 in the French Alps. Investigators say he was hiding a medical condition, raising questions about the mental qualifications of pilots. VOA's Carolyn Presutti reports.
Video

Video Hi-tech Motorbike Helmet's Goal: Improve Road Safety

In cities with heavily congested traffic, people can get around much faster on a motorcycle than in a car. But a rider who is not sure of his route may have to stop to look at the map or consult a GPS. A Russian start-up company is working to make navigation easier for motorcyclists. Designers at Moscow-based LiveMap are developing a smart helmet with a built-in navigation system, head-mounted display and voice recognition. Zlatica Hoke has more.
Video

Video New Wheelchair Is Easier to Use, Increases Mobility

Traditional push-rim wheelchairs create a lot of stress for arm, shoulder and neck muscles and joints. A redesigned chair, based on readily available bicycle technology, radically increases mobility while reducing the physical effort. VOA’s George Putic reports.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.
Video

Video Virginia Tavern Takes Patrons Back to Medieval Times

European martial arts are not widely practiced and are unknown by most people. A tavern in Old Town Alexandria, outside Washington, wants to change this by promoting these fighting techniques from medieval times. Through combining visual arts, martial arts and culinary arts, this tavern brings medieval history back to life. VOA's Yang Lin and Helen Wu report.
Video

Video Space Program Status Disappoints 'Last Man on the Moon'

One of the films that drew big crowds last week at the annual South by Southwest festival in Austin, Texas, tells the story of the last human being to stand on the moon, U.S. astronaut Eugene Cernan. It has been 42 years since Cernan returned from the moon and he laments that no one else has gone there since. VOA’s Greg Flakus reports.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

World Currencies

EUR
USD
0.9211
JPY
USD
119.18
GBP
USD
0.6722
CAD
USD
1.2509
INR
USD
62.518

Rates may not be current.