Alibaba Upcoming IPO Worries Some, Astounds Most

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Based on the numbers, Alibaba looks like a historic IPO. Yet, remember the Latin words of wisdom: Caveat emptor, which translates to “Let the buyer beware.”

The Chinese company has valued itself at about $120 billion, but once it begins trading that value is expected to jump to between $150 billion to over $200 billion – and may be as high as $250 billion. Also, analysts predict it could raise between $15 billion and $20 billion in the IPO – which could be more than Facebook's $16 billion IPO raised during 2012.  

Consider too how it is involved in the promising sector of mobile technology. During Q4, some 19.7 percent of its gross merchandise volume was linked to mobile, according to Business Insider. That is 7.4 percent more than what was seen in 2012.

Part of the company is Taobao Marketplace, which is described as "China's largest online shopping destination." In fact, some 80 percent of all e-commerce transactions in China are made via Alibaba. And Alibaba sales totaled $5.55 billion for the fiscal year ending in March 2013. That is a 72.4 percent jump compared to 2012.

"eBay, Amazon and Google (should) be scared," Matthew Turlip, an analyst with PrivCo, was quoted by The San Jose Mercury News. "I think Alibaba is definitely going to be a major player. There's no reason for them not to go after the U.S. market. It's not a matter of if, but when."

Remember, too, that Yahoo, owns about 23 percent of Alibaba, and it may sell close to “half of its stake” during the IPO. That may lead to more acquisitions by Yahoo with the new cash.

So when will Alibaba stock be offered? The IPO may not take place until September or even later this year.

Alibaba's registration statement for IPO is more than 2,300 pages, which USA Today called “short on details.” It did not include a market value, or an IPO price.

Brian Hamilton, head of Sageworks, told USA Today, "In the case of Alibaba, my one major concern is the fact that there may be limits on the disclosures Alibaba and its auditors can make due to Chinese law."

"If they don't play ball in terms of disclosure, Alibaba may not have interest among major institutional investors,'' Drew Dorweiler, a trustee with the Appraisal Foundation, added in a statement to the newspaper. “They may have to go back to the drawing board and release more detailed information."

Other areas which are unclear are “individual performance of the major e-commerce platforms that make up the bulk of its revenue, details of the business of electronic-payment affiliate Alipay, its strategy for a string of pricey recent acquisitions and plans for improving the way it delivers packages to Chinese customers,” according to The Wall Street Journal.

In addition, Forrester analyst Kelland Willis told The Journal, "People in the West have suspicions about the way Chinese companies are operating, and they're going to want to know specific numbers and details about Alibaba's books."

Reuters also reported that Alibaba includes on Page 42 of the prospectus a warning that executive chairman Jack Ma “might work against the company's best interests,” the news service said. Ma has investments in businesses that partner with Alibaba.

Still, while Jim Angel, associate professor of finance at Georgetown University, told Reuters, "There's definitely a lot of questions over this offering” – but there is “no doubt that Alibaba is a major e-commerce play."




Edited by Maurice Nagle
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