Recent reports suggest that the world’s largest B2B online trading platform for small businesses, Alibaba, is contemplating adding shares to its IPO. This could potentially make it the biggest ever, overtaking Agricultural Bank of China’s $22.1bn offering in 2010.
This large sum is usual for banks, but Alibaba is a tech company and overpriced IPOs in this sector are common. Alibaba, however, are different, here are 5 reasons why they are and why you may want to bet on them:
1. In the business of haggling
Alibaba’s model is that of a marketplace, buyers are able to haggle prices with sellers until an agreed price is settled on. They act as a middle man, not handling the good themselves but acting as a platform for others to sell goods. The model is comparable to that of eBay.
Alibaba also have the advantage of being based in China. The online market in China is twice the size of the internet market in the USA according to TV news channel CNN.
2. One company does it all
Alibaba as a company is almost impossible to compare to just one company. It is to China what PayPal, eBay, Amazon and Google are to the U.S.
Alibaba is a group made up of several different companies, some that offer similar services to Amazon, eBay and PayPal , two of its retail sites, TaoBao and Tmall, alone accounting for half of all the packages delivered in China. Alipay, Alibaba’s mobile payment service and equivalent to PayPal, account for a massive 70 per cent of all of China’s mobile payments. Alipay also recently over took PayPal as the largest mobile payment platform in the world.
There is talk of them branching out to cloud computing in the near future.
3. Next stop, America
Already dominating the country with the world’s largest amount of internet users, Alibaba is slowly but surely moving its way across the pond to the United States where more online shoppers await the U.S specific marketplace Alibaba has formed.
This is not the only American pie they have their finger in. They also recently acquired the Californian-based app Tango, a messaging and free-calling app, for $215m, which may sound overpriced, but is just a mere fraction of the $3.5bn they spent in all their purchases since the beginning of 2013.
Alibaba branching out is definitely going to please investors and subsequently terrify their American conglomerate competitors, such as Amazon, eBay and Walmart as well as large fashion brands such as forever21 and H&M.
4. Revenues keep climbing
Yahoo, who owns a 24 per cent stake in Alibaba, has stated that the company’s 4th quarter earnings for 2013 more than doubled those of 2012 at $1.35bn, with revenues up by 66 per cent at an impressive $3.06bn.
The total gross merchandise traded on its e-commerce marketplaces for the year were approximately $240bn, which when compared to the $100bn Amazon raked in, demonstrates just how powerful this company is.
5. Bigger than Facebook
The current holder of the largest U.S. tech IPO record is the popular social network, Facebook, at $16 billion in 2012.
Initially Alibaba’s IPO was estimated at $14bn, but since then they have invested billions into acquiring various companies, and as a result analysts are now saying that Alibaba could raise more than Facebook’s $16bn with their IPO.
So, what do the experts say?
They have the numbers, but is Alibaba’s IPO deserving of the possible title of the largest IPO ever? Elise Blanford, Chief Analyst at trading company anyoption believes so. “Personally, I can’t think of any company more deserving. But that doesn’t necessarily mean you should jump on it right away.”
She warns that before you jump straight into buying shares you should take into account that early access is usually given to preferred clients. This could mean that the average Joe investor is not guaranteed to get it at the price they want.
“If your plan is to just make some speedy cash you may be going about it the wrong way, this isn’t necessarily exclusively applicable to Alibaba’s IPO but to all IPOs generally.”