Friday, May 9, 2014

Opened, Sesame! Alibaba Files for IPO in the U.S.

Papers were filed May 8 for what is being called the biggest initial public offering in U.S. history. The catch? The IPO is for a Chinese company.

Alibaba – no, not the character from One Thousand and One Arabian Nights – but the Chinese company specialized in online and mobile sale, has suddenly emerged as the talk of the money town.

The IPO announced by Alibaba Group was for $1 billion. Analysts argue that much more will be raised. Specifically, it is expected that, in the upcoming process extending from three to four months, the company could raise over $16 billion. This sum would beat what Facebook raised in its IPO two years ago.


Information on Alibaba Group

Reuters reported that Alibaba currently makes up four fifths of all online commerce. It is the largest Chinese corporation to have sought a home on U.S. exchanges. While Yahoo Inc and Softbank own 22.6 percent and 34.4 percent of it respectively, Jack Ma owns 8.9 percent.

This former English teacher turned third richest man in China, founded the online retailer in 1999. Just twenty years earlier, China required its citizens to use ration tickets to buy supermarket items. Today, Ma’s creation allows costumers to buy and sell products online through Taobao (similar to eBay), to buy items from major brands through Tmall and make transactions through Alipay (similar to PayPal).


Alibaba broke sales on China’s Singles Day (November 11) last year, generating over $5.75 billion on Alibaba-owned platforms

USA Today described Alibaba as an Internet middleman, charging sellers for marketing and advertising. Such a business scheme will be continue to be lucrative as the online market continues to grow in China. Chinese consumers are increasingly turning to the Internet for purchases, with the growing popularity of smartphones facilitating such transactions. According to Alibaba, about 618 million Chinese used the Internet in 2013, but the number will rise to 790 million by 2016.

The news about the Alibaba IPO once again helps turn heads towards the East.

Western-based companies are often taken for granted as the example to follow or watch, but it is time to start looking a different way.

Before last week, Amazon and eBay were regarded as the heads in online retail. This IPO has shed light on the fact that Alibaba made $240 billion in sales last year. Guess what? That’s more than Amazon and eBay combined. Yet the world is still taken aback.

The Economist released a conclusion at the end of last month that did not seem to get enough attention. It announced an important verdict: China will overcome the U.S. and become the world’s largest economy by the end of 2014. You read that right. Not by the end of 2020 or the end of 2017, but by the end of this year. At least according to The Economist.

Maybe we should start reading up on other Chinese companies before the next one yells “open sesame”.

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