Alibaba's listing this week will catapult the previously little-known Chinese e-commerce giant to the top of the biggest tech IPOs, as it would raise as much as $25 billion, and direct investor interest onto the sector, boding well for SA's Naspers.
Proceeds from the record-breaking offering, which Reuters says could be the biggest the world has ever seen, will go into growing its business in the US and Europe, the wire service quoted founder Jack Ma as saying.
"After being listed in the US, we will develop our business in Europe and in the US. We will not give up the Asia market because, as I would say, we are not a company from China, we are an Internet company that happened to be in China."
Big numbers
Alibaba's listing is one of the most anticipated tech IPOs since Facebook debuted in 2008. Unlike the social media giant, the Chinese company is heading to the New York Stock Exchange in a bid to avoid the mess on the Nasdaq that marred Facebook's debut.
The group, which has 20 000 staff, is so big it apparently could encompass several Western rivals, including PayPal, eBay, DropBox, Groupon, Amazon, Twitter as well as Spotify - among others. The giant entity, founded in 1999, serves 190 countries globally, and has an end-to-end offering that encompasses online shopping "destinations", payment services and Web development.
Its May filing notes it is the "largest online and mobile commerce company in the world" when it comes to gross merchandise volume. In 2013, it turned over $6.5 billion, and reported an attractive profit margin of $2.9 billion.
In a bid to grow even bigger, the company wants to increase its active buyer base, as well as share of wallets, and will launch loyalty programmes, expand its marketing affiliates, and promote the use of apps. Alibaba also aims to expand its categories and offerings, and develop cross-border opportunities.
However, Alibaba does face challenges, including the risk of not being able to monetise its mobile traffic, the global economy and increased investments in the business, which will affect its margins. The group also faces risks, including the reliability and security of its platform.
Head-to-head
Vestact analyst Sasha Naryshkine says this "will be bigger than Amazon". And notes the company could raise as much as $25 billion if it goes for the top end of its $66 to $68 price range. Should everything go according to plan, says Naryshkine, pricing will wrap up on Thursday night, and the company will start trading on the New York Stock Exchange on Friday morning.
On listing, Alibaba - which will use the share code BABA - could be worth as much as $155 billion, says Naryshkine. The listing will be bigger than that of Visa, which - in 2008 - was the biggest tech IPO in the States, raising $17.86 billion. "This is not short of giganormous."
Naryshkine says Alibaba will compete heavily with companies like Amazon and eBay (which has dismissed speculation that it is up for grabs by Google) as well as traditional bricks-and-mortar companies. He says the cash it raises will go into building up its infrastructure so that overnight deliveries become a reality in every major city.
Alibaba can capitalise on the global shift towards shopping online, and benefit from low e-commerce penetration rates, which will pick up, adds Naryshkine. He expects the stock to "pop" on the day, but notes the Chinese company will take about four or five years before it makes "real" profits that bulk up the share price.
Naryshkine notes a good share price will bode well for e-commerce entities like Naspers, which is focusing on its e-commerce arm. He adds its current pricing has been done "well".
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