In a bid to internationalise itself, China’s biggest e-commerce firm Alibaba Group is planning to float in the US stock markets and raise $15 billion from sales of shares. Will the IPO help Alibaba become more global?
Alibaba Group has finally announced its intention to pursue an initial public offering (IPO) in the US, and reports suggest it could be a record-breaker.
The e-commerce company could be hoping to raise as much as $15 billion (£9 billion) through the sale of its shares when they become available in New York, which would suggest a valuation of anywhere between $150 billion and $200 billion. According to the Independent, that would constitute the largest IPO in history and if it came in at the upper end of that scale, could render Alibaba second only to Google as the world’s most valuable web firm.
For a company that relatively few people on the street are likely to have heard of outside of its native China, that’s an accomplishment that may raise a few eyebrows. But among retailers and manufacturers Alibaba is one of the world’s biggest names: it has nine major websites which target businesses selling to consumers and other businesses, an eBay-like site where members of the public can buy and sell their own items and others. With more than half a billion users around the world, the Chinese company is the world’s largest online retailer.
So why didn’t Alibaba head to Hong Kong or Shanghai? It was originally mooted that the firm might float in Hong Kong, but its governance structure has been found incompatible with the city’s trading rules. Alibaba’s management structure allows the senior executives to keep control over the board of directors and have a say in specific hires, which is prohibited in Hong Kong. Hopes for a last-minute change of the rules were dashed.
Alibaba has made several acquisitions recently, and it is hoped a listing might reduce the cost of capital to pay for its plans to expand. As chairman of BDA China Ltd Duncan Clark told Bloomberg, a sophisticated investor base and deep pools of capital would make the US particularly attractive.
But equally, the company has asserted that listing in the US will help extend Alibaba’s worldwide reach.
“This will make us a more global company and enhance the company’s transparency, as well as allow the company to continue to pursue our long-term vision and ideals,” it said in a statement.
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