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Alibaba IPO Is Going to be Huge

Companies / Corporate News Mar 31, 2014 - 01:58 PM GMT

By: Money_Morning


Kyle Anderson writes: There's still no official date set for the Alibaba IPO, but that hasn't stopped analysts and investors from speculating about the size of the company's initial public offering.

Alibaba IPOAccording to some analysts, the Alibaba IPO could raise almost as much as Facebook Inc.'s (Nasdaq: FB) 2012IPO, which raised $16 billion.

Facebook was valued at $104 billion when it made its public debut on May 17, 2012. At the time, that was the highest valuation of any American IPO.

By all accounts, Alibaba will smash that figure.

A Reuters report in February polled eight analysts who estimated that Alibaba could reach a valuation of $140 billion.

This week, the London-based, spread-betting firm "Gray Market" set the over/under line on Alibaba's valuation at an incredible $255 billion. That value was considered high, and the firm brought the line down. Currently the line is hovering between $235 billion and $245 billion.

Admittedly, Alibaba is unlikely to meet a valuation figure in the mid-$200 billion range. However, there's reason to believe the valuation total will climb past the estimated $140 billion...

Alibaba IPO: Why The Valuation Is Climbing

When news first broke about a potential U.S. IPO for Alibaba, analysts had valued the company near $100 billion, putting it right in line with Facebook's IPO. That figure started rising almost immediately.

Alibaba spent much of the past year adding new companies to its portfolio, diversifying its capabilities, and expanding its reach.

In the last year, the company has added an e-commerce site in the United States, a 60% stake in one of China's largest television media companies, and partial stakes in web browsers and social media sites. The company has bought at least a portion of 11 different companies and spent more than $2 billion in the past 12 months.

Before the acquisition surge, Alibaba operated a network of e-commerce websites in China that operated like (Nasdaq: AMZN), eBay Inc. (Nasdaq: EBAY), and PayPal. Now, it's making strides to be more than just an e-commerce company.

Additionally, these financial reports have pushed the valuation even higher...

In the first nine months of 2013, Alibaba's revenue was up 51% from the previous year to $1.78 billion. Net profit was up nearly 45% from 2012, at $792 million.

The burgeoning nature of China's e-commerce industry doesn't hurt either. According to the research firm McKinsey & Co., e-commerce in China is expected to be a $420 billion industry by 2020, up from $210 billion in 2012. As the largest e-commerce firm in China, no one is set to cash in as much as Alibaba.

And investors are a step closer to getting a piece of this lucrative market...

Alibaba IPO: Company and Banks Begin Prep Work

On Tuesday, Alibaba held a "kick off" meeting in Hong Kong with its lead underwriting banks to formulate a plan for the highly anticipated initial public offering.

The company did not make any formal announcement about the meeting. Presumably company officials and representatives from the underwriting firms began working out financial details of the IPO, including how much money will be raised, the company's value, the share price range, and the IPO date, among other details.

According to Reuters, Alibaba has discussed using Citigroup Inc. (NYSE: C), Credit Suisse Group AG (NYSE: CS), Deutsche Bank AG (NYSE: DB), Goldman Sachs Group Inc. (NYSE: GS), JPMorgan Chase & Co. (NYSE: JPM), and Morgan Stanley (NYSE: MS) as lead underwriters on the deal.

While investors wait for more information from company officials, new estimates about the IPO have been coming in almost every week.

A Wall Street Journal report last week cited sources close to Alibaba who estimated that the IPO could raise up to $15 million. That would put it just behind Facebook for fifth-largest U.S. IPO ever, in terms of money raised.

That's why Alibaba is the most exciting IPO of 2014.

"With Alibaba, investors will be getting a stock that offers a broad play on the world's most populous economy and a mushrooming web sector," Money Morning's Defense & Tech Specialist Michael Robinson said.

Are you interested in investing in the Alibaba IPO? Give us your thoughts on the company on Twitter @moneymorning using #Alibaba.

When it comes to Federal Reserve statements, there is a huge economic indicator that everyone misses...

Source :

Money Morning/The Money Map Report

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